1-1 By: Cuellar, et al. (Senate Sponsor - Ellis) H.B. No. 820
1-2 (In the Senate - Received from the House May 9, 1997;
1-3 May 12, 1997, read first time and referred to Committee on
1-4 Jurisprudence; May 18, 1997, reported favorably by the following
1-5 vote: Yeas 7, Nays 0; May 18, 1997, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to civil actions to recover fraudulent Medicaid claims.
1-9 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-10 SECTION 1. Chapter 36, Human Resources Code, is amended by
1-11 designating Sections 36.001, 36.002, 36.007, 36.008, 36.009,
1-12 36.010, 36.011, and 36.012 as Subchapter A, renumbering Sections
1-13 36.007, 36.008, 36.009, 36.010, 36.011, and 36.012 as Sections
1-14 36.003, 36.004, 36.005, 36.006, 36.007, and 36.008, respectively,
1-15 and adding a subchapter heading to read as follows:
1-16 SUBCHAPTER A. GENERAL PROVISIONS
1-17 SECTION 2. Chapter 36, Human Resources Code, is amended by
1-18 designating Sections 36.003, 36.004, 36.005, and 36.006 as
1-19 Subchapter B, renumbering those sections as Sections 36.051,
1-20 36.052, 36.053, and 36.054, respectively, and adding a subchapter
1-21 heading to read as follows:
1-22 SUBCHAPTER B. ACTION BY ATTORNEY GENERAL
1-23 SECTION 3. Section 36.004, Human Resources Code, as
1-24 renumbered by this Act as Section 36.052, is amended by amending
1-25 Subsection (e) to read as follows:
1-26 (e) The attorney general may:
1-27 (1) bring an action for civil remedies under this
1-28 section together with a suit for injunctive relief under Section
1-29 36.051 [36.003]; or
1-30 (2) institute an action for civil remedies
1-31 independently of an action for injunctive relief.
1-32 SECTION 4. Section 36.005, Human Resources Code, as
1-33 renumbered by this Act as Section 36.053, is amended by amending
1-34 Subsection (b) to read as follows:
1-35 (b) In investigating an unlawful act, the attorney general
1-36 may:
1-37 (1) require the person to file on a prescribed form a
1-38 statement in writing, under oath or affirmation, as to all the
1-39 facts and circumstances concerning the alleged unlawful act and
1-40 other information considered necessary by the attorney general;
1-41 (2) examine under oath a person in connection with the
1-42 alleged unlawful act; and
1-43 (3) execute in writing and serve on the person a civil
1-44 investigative demand requiring the person to produce the
1-45 documentary material and permit inspection and copying of the
1-46 material under Section 36.054 [36.006].
1-47 SECTION 5. Section 36.009, Human Resources Code, as
1-48 renumbered by this Act as Section 36.005, is amended by amending
1-49 Subsection (a) and adding Subsection (c) to read as follows:
1-50 (a) The commissioner of human services, the commissioner of
1-51 public health, the commissioner of mental health and mental
1-52 retardation, the executive director of the Department of Protective
1-53 and Regulatory Services, or the executive director of another state
1-54 health care regulatory agency may suspend or revoke:
1-55 (1) a provider agreement between the department or
1-56 agency and a person found liable under Section 36.052 [36.004]; or
1-57 (2) a permit, license, or certification granted by the
1-58 department or agency to a person found liable under Section 36.052
1-59 [36.004].
1-60 (c) For purposes of this section, a person is considered to
1-61 have been found liable under Section 36.052 if the person is found
1-62 liable in an action brought under Subchapter C.
1-63 SECTION 6. Subchapter B, Chapter 36, Human Resources Code,
1-64 as designated by this Act, is amended by adding Section 36.055 to
2-1 read as follows:
2-2 Sec. 36.055. ATTORNEY GENERAL AS RELATOR IN FEDERAL ACTION.
2-3 To the extent permitted by 31 U.S.C. Sections 3729-3733, the
2-4 attorney general may bring an action as relator under 31 U.S.C.
2-5 Section 3730 with respect to an act in connection with the Medicaid
2-6 program for which a person may be held liable under 31 U.S.C.
2-7 Section 3729. The attorney general may contract with a private
2-8 attorney to represent the state under this section.
2-9 SECTION 7. Chapter 36, Human Resources Code, is amended by
2-10 adding Subchapter C to read as follows:
2-11 SUBCHAPTER C. ACTION BY PRIVATE PERSONS
2-12 Sec. 36.101. ACTION BY PRIVATE PERSON AUTHORIZED. (a) A
2-13 person may bring a civil action for a violation of Section 36.002
2-14 for the person and for the state. The action shall be brought in
2-15 the name of the person and of the state.
2-16 (b) In an action brought under this subchapter, a person who
2-17 violates Section 36.002 is liable as provided by Section 36.052.
2-18 Sec. 36.102. INITIATION OF ACTION. (a) A person bringing
2-19 an action under this subchapter shall serve a copy of the petition
2-20 and a written disclosure of substantially all material evidence and
2-21 information the person possesses on the attorney general in
2-22 compliance with the Texas Rules of Civil Procedure.
2-23 (b) The petition shall be filed in camera and shall remain
2-24 under seal until at least the 60th day after the date the petition
2-25 is filed. The petition may not be served on the defendant until
2-26 the court orders service on the defendant.
2-27 (c) The state may elect to intervene and proceed with the
2-28 action not later than the 60th day after the date the attorney
2-29 general receives the petition and the material evidence and
2-30 information.
2-31 (d) The state may, for good cause shown, move the court to
2-32 extend the time during which the petition remains under seal under
2-33 Subsection (b). A motion under this subsection may be supported by
2-34 affidavits or other submissions in camera.
2-35 (e) An action under this subchapter may be dismissed before
2-36 the end of the period prescribed by Subsection (b), as extended as
2-37 provided by Subsection (d), if applicable, only if the court and
2-38 the attorney general consent in writing to the dismissal and state
2-39 their reasons for consenting.
2-40 Sec. 36.103. ANSWER BY DEFENDANT. A defendant is not
2-41 required to file an answer to a petition filed under this
2-42 subchapter until the 20th day after the date the petition is
2-43 unsealed and served on the defendant in compliance with the Texas
2-44 Rules of Civil Procedure.
2-45 Sec. 36.104. CONTINUATION OR DISMISSAL OF ACTION BASED ON
2-46 STATE DECISION. (a) Not later than the last day of the period
2-47 prescribed by Section 36.102(b), as extended as provided by Section
2-48 36.102(d), if applicable, the state shall:
2-49 (1) proceed with the action; or
2-50 (2) notify the court that the state declines to take
2-51 over the action.
2-52 (b) If the state declines to take over the action, the court
2-53 shall dismiss the action.
2-54 Sec. 36.105. REPRESENTATION OF STATE BY PRIVATE ATTORNEY.
2-55 The attorney general may contract with a private attorney to
2-56 represent the state in an action under this subchapter with which
2-57 the state elects to proceed.
2-58 Sec. 36.106. INTERVENTION BY OTHER PARTIES PROHIBITED. A
2-59 person other than the state may not intervene or bring a related
2-60 action based on the facts underlying a pending action brought under
2-61 this subchapter.
2-62 Sec. 36.107. RIGHTS OF PARTIES IF STATE CONTINUES ACTION.
2-63 (a) If the state proceeds with the action, the state has the
2-64 primary responsibility for prosecuting the action and is not bound
2-65 by an act of the person bringing the action. The person bringing
2-66 the action has the right to continue as a party to the action,
2-67 subject to the limitations set forth by this section.
2-68 (b) The state may dismiss the action notwithstanding the
2-69 objections of the person bringing the action if:
3-1 (1) the attorney general notifies the person that the
3-2 state has filed a motion to dismiss; and
3-3 (2) the court provides the person with an opportunity
3-4 for a hearing on the motion.
3-5 (c) The state may settle the action with the defendant
3-6 notwithstanding the objections of the person bringing the action if
3-7 the court determines, after a hearing, that the proposed settlement
3-8 is fair, adequate, and reasonable under all the circumstances. On
3-9 a showing of good cause, the hearing may be held in camera.
3-10 (d) On a showing by the state that unrestricted
3-11 participation during the course of the litigation by the person
3-12 bringing the action would interfere with or unduly delay the
3-13 state's prosecution of the case, or would be repetitious,
3-14 irrelevant, or for purposes of harassment, the court may impose
3-15 limitations on the person's participation, including:
3-16 (1) limiting the number of witnesses the person may
3-17 call;
3-18 (2) limiting the length of the testimony of witnesses
3-19 called by the person;
3-20 (3) limiting the person's cross-examination of
3-21 witnesses; or
3-22 (4) otherwise limiting the participation by the person
3-23 in the litigation.
3-24 (e) On a showing by the defendant that unrestricted
3-25 participation during the course of the litigation by the person
3-26 bringing the action would be for purposes of harassment or would
3-27 cause the defendant undue burden or unnecessary expense, the court
3-28 may limit the participation by the person in the litigation.
3-29 Sec. 36.108. STAY OF CERTAIN DISCOVERY. (a) On a showing
3-30 by the state that certain actions of discovery by the person
3-31 bringing the action would interfere with the state's investigation
3-32 or prosecution of a criminal or civil matter arising out of the
3-33 same facts, the court may stay the discovery for a period not to
3-34 exceed 60 days.
3-35 (b) The court shall hear a motion to stay discovery under
3-36 this section in camera.
3-37 (c) The court may extend the period prescribed by Subsection
3-38 (a) on a further showing in camera that the state has pursued the
3-39 criminal or civil investigation or proceedings with reasonable
3-40 diligence and that any proposed discovery in the civil action will
3-41 interfere with the ongoing criminal or civil investigation or
3-42 proceedings.
3-43 Sec. 36.109. PURSUIT OF ALTERNATE REMEDY BY STATE. (a)
3-44 Notwithstanding Section 36.101, the state may elect to pursue the
3-45 state's claim through any alternate remedy available to the state,
3-46 including any administrative proceeding to determine an
3-47 administrative penalty. If an alternate remedy is pursued in
3-48 another proceeding, the person bringing the action has the same
3-49 rights in the other proceeding as the person would have had if the
3-50 action had continued under this subchapter.
3-51 (b) A finding of fact or conclusion of law made in the other
3-52 proceeding that has become final is conclusive on all parties to an
3-53 action under this subchapter. For purposes of this subsection, a
3-54 finding or conclusion is final if:
3-55 (1) the finding or conclusion has been finally
3-56 determined on appeal to the appropriate court;
3-57 (2) no appeal has been filed with respect to the
3-58 finding or conclusion and all time for filing an appeal has
3-59 expired; or
3-60 (3) the finding or conclusion is not subject to
3-61 judicial review.
3-62 Sec. 36.110. AWARD TO PRIVATE PLAINTIFF. (a) If the state
3-63 proceeds with an action under this subchapter, the person bringing
3-64 the action is entitled, except as provided by Subsection (b), to
3-65 receive at least 10 percent but not more than 25 percent of the
3-66 proceeds of the action, depending on the extent to which the person
3-67 substantially contributed to the prosecution of the action.
3-68 (b) If the court finds that the action is based primarily on
3-69 disclosures of specific information, other than information
4-1 provided by the person bringing the action, relating to allegations
4-2 or transactions in a criminal or civil hearing, in a legislative or
4-3 administrative report, hearing, audit, or investigation, or from
4-4 the news media, the court may award the amount the court considers
4-5 appropriate but not more than seven percent of the proceeds of the
4-6 action. The court shall consider the significance of the
4-7 information and the role of the person bringing the action in
4-8 advancing the case to litigation.
4-9 (c) A payment to a person under this section shall be made
4-10 from the proceeds of the action. A person receiving a payment
4-11 under this section is also entitled to receive an amount for
4-12 reasonable expenses that the court finds to have been necessarily
4-13 incurred, plus reasonable attorney's fees and costs. Expenses,
4-14 fees, and costs shall be awarded against the defendant.
4-15 (d) In this section, "proceeds of the action" includes
4-16 proceeds of a settlement of the action.
4-17 Sec. 36.111. REDUCTION OF AWARD. (a) If the court finds
4-18 that the action was brought by a person who planned and initiated
4-19 the violation of Section 36.002 on which the action was brought,
4-20 the court may, to the extent the court considers appropriate,
4-21 reduce the share of the proceeds of the action the person would
4-22 otherwise receive under Section 36.110, taking into account the
4-23 person's role in advancing the case to litigation and any relevant
4-24 circumstances pertaining to the violation.
4-25 (b) If the person bringing the action is convicted of
4-26 criminal conduct arising from the person's role in the violation of
4-27 Section 36.002, the court shall dismiss the person from the civil
4-28 action and the person may not receive any share of the proceeds of
4-29 the action. A dismissal under this subsection does not prejudice
4-30 the right of the state to continue the action.
4-31 Sec. 36.112. AWARD TO DEFENDANT FOR FRIVOLOUS ACTION.
4-32 Chapter 105, Civil Practice and Remedies Code, applies in an action
4-33 under this subchapter with which the state proceeds.
4-34 Sec. 36.113. CERTAIN ACTIONS BARRED. (a) A person may not
4-35 bring an action under this subchapter that is based on allegations
4-36 or transactions that are the subject of a civil suit or an
4-37 administrative penalty proceeding in which the state is already a
4-38 party.
4-39 (b) A person may not bring an action under this subchapter
4-40 that is based on the public disclosure of allegations or
4-41 transactions in a criminal or civil hearing, in a legislative or
4-42 administrative report, hearing, audit, or investigation, or from
4-43 the news media, unless the person bringing the action is an
4-44 original source of the information. In this subsection, "original
4-45 source" means an individual who has direct and independent
4-46 knowledge of the information on which the allegations are based and
4-47 has voluntarily provided the information to the state before filing
4-48 an action under this subchapter that is based on the information.
4-49 Sec. 36.114. STATE NOT LIABLE FOR CERTAIN EXPENSES. The
4-50 state is not liable for expenses that a person incurs in bringing
4-51 an action under this section.
4-52 Sec. 36.115. RETALIATION BY EMPLOYER AGAINST PERSON BRINGING
4-53 SUIT PROHIBITED. (a) A person who is discharged, demoted,
4-54 suspended, threatened, harassed, or in any other manner
4-55 discriminated against in the terms of employment by the person's
4-56 employer because of a lawful act taken by the person in furtherance
4-57 of an action under this subchapter, including investigation for,
4-58 initiation of, testimony for, or assistance in an action filed or
4-59 to be filed under this subchapter, is entitled to:
4-60 (1) reinstatement with the same seniority status the
4-61 person would have had but for the discrimination; and
4-62 (2) not less than two times the amount of back pay,
4-63 interest on the back pay, and compensation for any special damages
4-64 sustained as a result of the discrimination, including litigation
4-65 costs and reasonable attorney's fees.
4-66 (b) A person may bring an action in the appropriate district
4-67 court for the relief provided in this section.
4-68 Sec. 36.116. SOVEREIGN IMMUNITY NOT WAIVED. Except as
4-69 provided by Section 36.112, this subchapter does not waive
5-1 sovereign immunity.
5-2 SECTION 8. Chapter 531, Government Code, is amended by
5-3 adding Subchapter C to read as follows:
5-4 SUBCHAPTER C. MEDICAID FRAUD, MISUSE, OR OVERCHARGES
5-5 Sec. 531.101. AWARD FOR REPORTING MEDICAID FRAUD, MISUSE, OR
5-6 OVERCHARGES. (a) The commission may grant an award to an
5-7 individual who reports activity that constitutes fraud or misuse of
5-8 funds in the state Medicaid program or reports overcharges in the
5-9 program if the commission determines that the disclosure results in
5-10 the recovery of an overcharge or in the termination of the
5-11 fraudulent activity or misuse of funds.
5-12 (b) The commission shall determine the amount of an award.
5-13 The award must be equal to not less than 10 percent of the savings
5-14 to this state that result from the individual's disclosure. In
5-15 determining the amount of the award, the commission shall consider
5-16 how important the disclosure is in ensuring the fiscal integrity of
5-17 the program.
5-18 (c) An award under this section is subject to appropriation.
5-19 The award must be paid from money appropriated to or otherwise
5-20 available to the commission, and additional money may not be
5-21 appropriated to the commission for the purpose of paying the award.
5-22 (d) Payment of an award under this section from federal
5-23 funds is subject to the permissible use under federal law of funds
5-24 for this purpose.
5-25 (e) A person who brings an action under Subchapter C,
5-26 Chapter 36, Human Resources Code, is not eligible for an award
5-27 under this section.
5-28 Sec. 531.102. ASSISTING INVESTIGATIONS BY ATTORNEY GENERAL.
5-29 (a) The commission and the attorney general shall execute a
5-30 memorandum of understanding under which the commission shall
5-31 provide investigative support as required to the attorney general
5-32 in connection with cases under Subchapter B, Chapter 36, Human
5-33 Resources Code. Under the memorandum of understanding, the
5-34 commission shall assist in performing preliminary investigations
5-35 and ongoing investigations for actions prosecuted by the attorney
5-36 general under Subchapter C, Chapter 36, Human Resources Code.
5-37 (b) The memorandum of understanding must provide that the
5-38 commission is not required to provide investigative support in more
5-39 than 100 open investigations in a fiscal year.
5-40 SECTION 9. The office of the attorney general shall develop
5-41 strategies to increase state recoveries under 31 U.S.C. Sections
5-42 3729-3733. The office shall report the results of the office's
5-43 effort to the legislature not later than September 1, 1998.
5-44 SECTION 10. (a) In addition to the substantive changes made
5-45 by this Act, this Act conforms Chapter 531, Government Code, to
5-46 Section 1, Chapter 444, Acts of the 74th Legislature, Regular
5-47 Session, 1995.
5-48 (b) To the extent of any conflict, this Act prevails over
5-49 another Act of the 75th Legislature, Regular Session, 1997,
5-50 relating to nonsubstantive additions to and corrections in enacted
5-51 codes.
5-52 SECTION 11. Section 531.102, Government Code, as added by
5-53 this Act, takes effect only if the transfer of employees of the
5-54 Texas Department of Human Services and the Texas Department of
5-55 Health to the Health and Human Services Commission, as proposed by
5-56 Section 2, S.B. No. 741, or similar legislation, is enacted by the
5-57 75th Legislature in regular session and becomes law.
5-58 SECTION 12. The office of the attorney general shall study
5-59 the benefits of using private attorneys to prosecute civil actions
5-60 under Chapter 36, Human Resources Code. The office shall report
5-61 the results of the office's study to the legislature not later than
5-62 September 1, 1998.
5-63 SECTION 13. The office of the attorney general may retain a
5-64 reasonable portion of recoveries under this Act, not to exceed
5-65 amounts specified in the General Appropriations Act, for the
5-66 administration of this Act.
5-67 SECTION 14. This Act takes effect September 1, 1997.
5-68 SECTION 15. The importance of this legislation and the
5-69 crowded condition of the calendars in both houses create an
6-1 emergency and an imperative public necessity that the
6-2 constitutional rule requiring bills to be read on three several
6-3 days in each house be suspended, and this rule is hereby suspended.
6-4 * * * * *