By Zaffirini S.B. No. 389
75R2808 ESH-D
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. INTERVENTION BY OTHER PARTIES PROHIBITED. A
5-6 person other than the state may not intervene or bring a related
5-7 action based on the facts underlying a pending action brought under
5-8 this subchapter.
5-9 Sec. 36.106. RIGHTS OF PARTIES IF STATE CONTINUES ACTION.
5-10 (a) If the state proceeds with the action, the state has the
5-11 primary responsibility for prosecuting the action and is not bound
5-12 by an act of the person bringing the action. The person bringing
5-13 the action has the right to continue as a party to the action,
5-14 subject to the limitations set forth by this section.
5-15 (b) The state may dismiss the action notwithstanding the
5-16 objections of the person bringing the action if:
5-17 (1) the attorney general notifies the person that the
5-18 state has filed a motion to dismiss; and
5-19 (2) the court provides the person with an opportunity
5-20 for a hearing on the motion.
5-21 (c) The state may settle the action with the defendant
5-22 notwithstanding the objections of the person bringing the action if
5-23 the court determines, after a hearing, that the proposed settlement
5-24 is fair, adequate, and reasonable under all the circumstances. On
5-25 a showing of good cause, the hearing may be held in camera.
5-26 (d) On a showing by the state that unrestricted
5-27 participation during the course of the litigation by the person
6-1 bringing the action would interfere with or unduly delay the
6-2 state's prosecution of the case, or would be repetitious,
6-3 irrelevant, or for purposes of harassment, the court may impose
6-4 limitations on the person's participation, including:
6-5 (1) limiting the number of witnesses the person may
6-6 call;
6-7 (2) limiting the length of the testimony of witnesses
6-8 called by the person;
6-9 (3) limiting the person's cross-examination of
6-10 witnesses; or
6-11 (4) otherwise limiting the participation by the person
6-12 in the litigation.
6-13 (e) On a showing by the defendant that unrestricted
6-14 participation during the course of the litigation by the person
6-15 bringing the action would be for purposes of harassment or would
6-16 cause the defendant undue burden or unnecessary expense, the court
6-17 may limit the participation by the person in the litigation.
6-18 Sec. 36.107. RIGHTS OF PARTIES IF STATE DOES NOT CONTINUE
6-19 ACTION. (a) If the state elects not to proceed with the action,
6-20 the person bringing the action has the right to conduct the action.
6-21 (b) If the state requests pleadings and deposition
6-22 transcripts, the parties shall serve the attorney general with
6-23 copies of all pleadings filed in the action and shall send the
6-24 attorney general copies of all deposition transcripts at the
6-25 state's expense.
6-26 (c) The court, without limiting the status and rights of the
6-27 person bringing the action, may permit the state to intervene at a
7-1 later date on a showing of good cause.
7-2 Sec. 36.108. STAY OF CERTAIN DISCOVERY. (a) Regardless of
7-3 whether the state proceeds with the action, on a showing by the
7-4 state that certain actions of discovery by the person bringing the
7-5 action would interfere with the state's investigation or
7-6 prosecution of a criminal or civil matter arising out of the same
7-7 facts, the court may stay the discovery for a period not to exceed
7-8 60 days.
7-9 (b) The court shall hear a motion to stay discovery under
7-10 this section in camera.
7-11 (c) The court may extend the period prescribed by Subsection
7-12 (a) on a further showing in camera that the state has pursued the
7-13 criminal or civil investigation or proceedings with reasonable
7-14 diligence and that any proposed discovery in the civil action will
7-15 interfere with the ongoing criminal or civil investigation or
7-16 proceedings.
7-17 Sec. 36.109. PURSUIT OF ALTERNATE REMEDY BY STATE. (a)
7-18 Notwithstanding Section 36.101, the state may elect to pursue the
7-19 state's claim through any alternate remedy available to the state,
7-20 including any administrative proceeding to determine a civil
7-21 penalty. If an alternate remedy is pursued in another proceeding,
7-22 the person bringing the action has the same rights in the other
7-23 proceeding as the person would have had if the action had continued
7-24 under this subchapter.
7-25 (b) A finding of fact or conclusion of law made in the other
7-26 proceeding that has become final is conclusive on all parties to an
7-27 action under this subchapter. For purposes of this subsection, a
8-1 finding or conclusion is final if:
8-2 (1) the finding or conclusion has been finally
8-3 determined on appeal to the appropriate court;
8-4 (2) no appeal has been filed with respect to the
8-5 finding or conclusion and all time for filing an appeal has
8-6 expired; or
8-7 (3) the finding or conclusion is not subject to
8-8 judicial review.
8-9 Sec. 36.110. AWARD TO PRIVATE PLAINTIFF. (a) If the state
8-10 proceeds with an action under this subchapter, the person bringing
8-11 the action is entitled, except as provided by Subsection (b), to
8-12 receive at least 10 percent but not more than 25 percent of the
8-13 proceeds of the action, depending on the extent to which the person
8-14 substantially contributed to the prosecution of the action.
8-15 (b) If the court finds that the action is based primarily on
8-16 disclosures of specific information, other than information
8-17 provided by the person bringing the action, relating to allegations
8-18 or transactions in a criminal or civil hearing, in a legislative or
8-19 administrative report, hearing, audit, or investigation, or from
8-20 the news media, the court may award the amount the court considers
8-21 appropriate but not more than seven percent of the proceeds of the
8-22 action. The court shall consider the significance of the
8-23 information and the role of the person bringing the action in
8-24 advancing the case to litigation.
8-25 (c) If the state does not proceed with an action under this
8-26 subchapter, the person bringing the action or settling the claim is
8-27 entitled to receive an amount that the court decides is reasonable
9-1 for collecting the civil penalty and damages. The amount may not
9-2 be less than 25 percent or more than 30 percent of the proceeds of
9-3 the action.
9-4 (d) A payment to a person under this section shall be made
9-5 from the proceeds of the action. A person receiving a payment
9-6 under this section is also entitled to receive an amount for
9-7 reasonable expenses that the court finds to have been necessarily
9-8 incurred, plus reasonable attorney's fees and costs. Expenses,
9-9 fees, and costs shall be awarded against the defendant.
9-10 (e) In this section, "proceeds of the action" includes
9-11 proceeds of a settlement of the action.
9-12 Sec. 36.111. REDUCTION OF AWARD. (a) Regardless of whether
9-13 the state proceeds with the action, if the court finds that the
9-14 action was brought by a person who planned and initiated the
9-15 violation of Section 36.002 on which the action was brought, the
9-16 court may, to the extent the court considers appropriate, reduce
9-17 the share of the proceeds of the action the person would otherwise
9-18 receive under Section 36.110, taking into account the person's role
9-19 in advancing the case to litigation and any relevant circumstances
9-20 pertaining to the violation.
9-21 (b) If the person bringing the action is convicted of
9-22 criminal conduct arising from the person's role in the violation of
9-23 Section 36.002, the court shall dismiss the person from the civil
9-24 action and the person may not receive any share of the proceeds of
9-25 the action. A dismissal under this subsection does not prejudice
9-26 the right of the state to continue the action.
9-27 Sec. 36.112. AWARD TO DEFENDANT FOR FRIVOLOUS ACTION OR
10-1 ACTION BROUGHT FOR PURPOSES OF HARASSMENT. (a) If the state does
10-2 not proceed with the action and the person bringing the action
10-3 conducts the action, the court may award to the defendant the
10-4 defendant's reasonable attorney's fees and expenses if:
10-5 (1) the defendant prevails in the action; and
10-6 (2) the court finds that the claim of the person
10-7 bringing the action was clearly frivolous, clearly vexatious, or
10-8 brought primarily for purposes of harassment.
10-9 (b) Chapter 105, Civil Practice and Remedies Code, applies
10-10 in an action under this subchapter with which the state proceeds.
10-11 Sec. 36.113. CERTAIN ACTIONS BARRED. (a) A person may not
10-12 bring an action under this subchapter that is based on allegations
10-13 or transactions that are the subject of a civil suit or an
10-14 administrative penalty proceeding in which the state is already a
10-15 party.
10-16 (b) A person may not bring an action under this subchapter
10-17 that is based on the public disclosure of allegations or
10-18 transactions in a criminal or civil hearing, in a legislative or
10-19 administrative report, hearing, audit, or investigation, or from
10-20 the news media, unless the person bringing the action is an
10-21 original source of the information. In this subsection, "original
10-22 source" means an individual who has direct and independent
10-23 knowledge of the information on which the allegations are based and
10-24 has voluntarily provided the information to the state before filing
10-25 an action under this subchapter that is based on the information.
10-26 Sec. 36.114. STATE NOT LIABLE FOR CERTAIN EXPENSES. The
10-27 state is not liable for expenses that a person incurs in bringing
11-1 an action under this section.
11-2 Sec. 36.115. RETALIATION BY EMPLOYER AGAINST PERSON BRINGING
11-3 SUIT PROHIBITED. (a) A person who is discharged, demoted,
11-4 suspended, threatened, harassed, or in any other manner
11-5 discriminated against in the terms of employment by the person's
11-6 employer because of a lawful act taken by the person in furtherance
11-7 of an action under this subchapter, including investigation for,
11-8 initiation of, testimony for, or assistance in an action filed or
11-9 to be filed under this subchapter, is entitled to:
11-10 (1) reinstatement with the same seniority status the
11-11 person would have had but for the discrimination; and
11-12 (2) not less than two times the amount of back pay,
11-13 interest on the back pay, and compensation for any special damages
11-14 sustained as a result of the discrimination, including litigation
11-15 costs and reasonable attorney's fees.
11-16 (b) A person may bring an action in the appropriate district
11-17 court for the relief provided in this section.
11-18 SECTION 8. Chapter 531, Government Code, is amended by
11-19 adding Subchapter C to read as follows:
11-20 SUBCHAPTER C. MEDICAID FRAUD, MISUSE, OR OVERCHARGES
11-21 Sec. 531.101. AWARD FOR REPORTING MEDICAID FRAUD, MISUSE, OR
11-22 OVERCHARGES. (a) The commission may grant an award to an
11-23 individual who reports activity that constitutes fraud or misuse of
11-24 funds in the state Medicaid program or reports overcharges in the
11-25 program if the commission determines that the disclosure results in
11-26 the recovery of an overcharge or in the termination of the
11-27 fraudulent activity or misuse of funds.
12-1 (b) The commission shall determine the amount of an award.
12-2 The award must be equal to not less than 10 percent of the savings
12-3 to this state that result from the individual's disclosure. In
12-4 determining the amount of the award, the commission shall consider
12-5 how important the disclosure is in ensuring the fiscal integrity of
12-6 the program.
12-7 (c) An award under this section is subject to appropriation.
12-8 The award must be paid from money appropriated to or otherwise
12-9 available to the commission, and additional money may not be
12-10 appropriated to the commission for the purpose of paying the award.
12-11 (d) Payment of an award under this section from federal
12-12 funds is subject to the permissible use under federal law of funds
12-13 for this purpose.
12-14 (e) A person who brings an action under Subchapter C,
12-15 Chapter 36, Government Code, is not eligible for an award under
12-16 this section.
12-17 SECTION 9. The office of the attorney general shall develop
12-18 strategies to increase state recoveries under 31 U.S.C. Sections
12-19 3729-3733. The office shall report the results of the office's
12-20 effort to the legislature not later than September 1, 1998.
12-21 SECTION 10. (a) In addition to the substantive changes made
12-22 by this Act, this Act conforms Chapter 531, Government Code, to
12-23 Section 1, Chapter 444, Acts of the 74th Legislature, Regular
12-24 Session, 1995.
12-25 (b) To the extent of any conflict, this Act prevails over
12-26 another Act of the 75th Legislature, Regular Session, 1997,
12-27 relating to nonsubstantive additions to and corrections in enacted
13-1 codes.
13-2 SECTION 11. This Act takes effect September 1, 1997.
13-3 SECTION 12. The importance of this legislation and the
13-4 crowded condition of the calendars in both houses create an
13-5 emergency and an imperative public necessity that the
13-6 constitutional rule requiring bills to be read on three several
13-7 days in each house be suspended, and this rule is hereby suspended.