Office of House Bill AnalysisS.B. 1590
By: Zaffirini
Business & Industry


Currently, it is possible for a person or a health care provider to
fraudulently obtain or deny a workers' compensation medical benefit or
payment for a medical service.  The comptroller states in the Health Care
Claims Study that the State Office of Risk Management (office) has no
authority to sanction providers who do not comply with the requirements of
the state's workers' compensation system.  Subsequently, the comptroller
recommended providing the office with sanctioning authority. S.B. 1590
establishes the provisions for the investigation and prosecution of fraud
in the workers' compensation program for state employees.  


It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the risk management board of the State
Office of Risk Management in SECTION 1 (Section 412.064, Labor Code) of
this bill. 


SECTION 1.  Amends Chapter 412, Labor Code, by adding Subchapter G, as


 Sec. 412.061.  DEFINITIONS.  Defines "fraudulent act" and  "program."

Sec. 412.062.  CLAIM REVIEW BY OFFICE.  Requires the State Office of Risk
Management (office) to conduct periodic reviews of claims for medical
benefits as necessary to determine the medical necessity and
appropriateness of the provided services.  Requires the office, in addition
to periodic reviews, to conduct a claim review that involves the receipt of
psychiatric services or in which the use of prescription drugs appears
inappropriate. Authorizes the office to withhold payments to a health care
provider who does not provide certain documentation necessary to verify a
medical service related to a claim.  Requires the risk management board
(board) to establish criteria that trigger medical care coordination based
on the date of injury, the amount paid in medical benefits, and the
existence of inappropriate treatment patterns.  Requires the office to
implement measures for medical care coordination to ensure that the injured
workers receive appropriate treatment for reported injuries. 

Sec. 412.063.  CLAIMS AUDIT.  Requires the director of the office
(director) to conduct an annual audit of claims for medical benefits as
provided by this section.  Requires the director to select random claims
submitted under the program for medical benefits in a statistically
significant sample and to audit the claims to determine validity.  Requires
the director, in performing the audit, to interview the claimant in person
or by telephone to ensure that the health care services were received.
Requires the audit to include a review of the claimant's medical history
and medical records.  Authorizes the director to contract with a private
entity for performance of the audit.   

Sec. 412.064.  PREPAYMENT AUDIT.  Requires the board, by rule, to require
the office  to implement prepayment audit procedures that compares the
diagnosis code submitted on the bill for health care service to the code
for the injured body part, and that verifies the appropriateness of the
diagnosis code of the health care services provided. 

Sec. 412.065.  TRAINING CLASSES IN FRAUD PREVENTION.  Requires the director
to implement annual training classes for appropriate members of the staffs
of state agencies and contractors or administering firms who process
workers' compensation claims submitted under the program to assist the
attendees in identifying potential misrepresentation or fraud in the
operation of the program.  Authorizes the director to contract with the
Health and Human Services Commission (commission) or with a private entity
for the operation of the training classes. 

Sec. 412.066.  ACTION BY OFFICE; COOPERATION REQUIRED.  Requires the office
to take action against a provider who was determined to have obtained
payment through a fraudulent act.  Requires the office to report  in
writing any action to the commission. Requires each participating state
agency and health care provider, as a condition of participation, to
cooperate in any investigation conducted by the director.  Provides that
notwithstanding any other provision of law, the director is entitled to
access to patient medical records for the limited purpose provided by this
subchapter and is a "governmental agency" for purposes of Section 5.08
(Physician-Patient Communication), Article 4495b (Medical Practice Act),
V.T.C.S.  Provides that any medical record submitted to the director is
confidential and not subject to disclosure. 

director to investigate each complaint alleging fraud by a claimant, a
health care provider, or a state agency regarding a participating provider
or claimant who is participating in the program.  Requires the director to
terminate the investigation if, after an initial investigation, the
director determines that the complaint is unfounded.  Requires the
director, if further action is warranted, to refer the complaint to the
commission and provide information regarding the complaint to the
commission.  Requires the commission to initiate promptly administrative
proceedings or criminal prosecution on each complaint referred by the
director, and, on a finding of fraud or overpayment, to require restitution
to the office in addition to any other penalty assessed or action taken. 

Sec. 412.068.  REPORTS.  Requires the commission and office to report to
the legislature at the beginning of each session the specified statistics
and other information regarding the amount of prosecutions, restitutions,
referrals, fraud, and collected restitution on providers.  

SECTION 2.  Requires the office to implement the training classes under
Section 412.065, Labor Code, by January 1, 2000. 

SECTION 3.  Requires the board to conduct a study regarding the use of
fraud detection software. Authorizes the study to include an analysis of
the fraud detection program used by the Health and Human Services
Commission under Chapter 22 (General Functions of Department of Human
Services), Human Resources Code, for the detection of fraud in the Medicaid
program.  Requires the board to report the results of its study by February
1, 2001. 

SECTION 4. Effective date: September 1, 1999.

SECTION 5.Emergency clause.