Senate Research Center   S.B. 1590
76R5068 PB-DBy: Zaffirini
Human Services
As Filed


Currently, a person or a health care provider may fraudulently obtain or
deny a workers' compensation medical benefit or payment for a medical
service, such as Medicaid.  The comptroller states in a report, 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
would establish the investigation and prosecution of fraud in the workers'
compensation program for state employees, and would provide administrative


As proposed, S.B. 1590 establishes the investigation and prosecution of
fraud in the workers' compensation program for state employees, and
provides administrative penalties. 


Rulemaking authority is granted to the risk management board of the State
Office of Risk Management in SECTION 1 (Section 412.064, Chapter 412, 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 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 to conduct
certain claim reviews, in additional to periodic reviews.  Authorizes the
office to withhold payments to a health care provider who does not provide
certain documentation to verify a medical service related to a claim.   

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 certain random
claims and to audit the claims 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 risk management board of the
office to require, by rule, each person who processes claims for the office
to implement certain prepayment audit procedures.   

Sec. 412.065.  TOLL-FREE TELEPHONE NUMBER.  Requires the office to maintain
a tollfree number for the receipt of complaints regarding fraudulent acts
by claimants of health care providers.    Requires the director to provide
claimants with information regarding the telephone number when a workers'
compensation claim is submitted and periodically to notify state  employees
of the telephone number in a manner determined to be appropriate by the

Sec. 412.066.  TRAINING CLASSES IN FRAUD PREVENTION.  Requires the director
to implement annual training classes for staff of state agencies,
contractors,  or administering firms who process workers' compensation
claims submitted under the program to assist the attendees to identify
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. 412.067.  ACTION BY OFFICE; COOPERATION REQUIRED.  Requires the office
to take action against a provider who has obtained payment through a
fraudulent act.  Requires the office to report any action in writing to the
commission.  Requires each participating state agency and health care
provider to participate and cooperate, including providing access to
patient medical records, in any investigation conducted by the director, as
a condition of participation.  Entitles the director to access to patient
medical records and is a "governmental agency" for purposes of this
subchapter, notwithstanding any other provision of law.  Provides that any
medical record submitted to the director is confidential and not subject to

Sec. 412.068.  FRAUDULENT ACTS BY PROVIDERS.  Requires the director to
investigate each complaint alleging a fraud by a claimant, a health care
provider, or a state agency regarding a participating provider.  Requires
the director to terminate the investigation if, after an initial
investigation, the complaint is unfounded.  Requires the director to refer
the complaint to the risk management board, if further action is warranted,
and to provide the relevant information.  Sets forth sanction against the

Sec. 412.069.  ADMINISTRATIVE PENALTY.  Authorizes the risk management
board of the board to impose an administrative penalty on a person or
provider committing fraud. Prohibits the amount of the penalty from
exceeding $10,000 and each day a violation continues or occurs is a
separate violation for the purpose of the penalty.  Sets forth conditions
on which the amount must be based.  Authorizes the enforcement of the
penalty to be stayed during the time the order is under judicial review, if
the penalty is paid to the clerk or a supersedeas bond is filed in the
court.  Authorizes a person to file an affidavit, if the person cannot
afford to pay the penalty or file the bond.  Authorizes the attorney
general to sue to collect the penalty. Requires the penalty to be
transmitted to the comptroller.  Requires the comptroller to deposit the
penalty into the state workers' compensation account to be used for the
detection and prosecution of fraud, but prohibits a deposit from exceeding
$200,000 per state fiscal biennium. Considers a proceeding to impose the
penalty as a contested case under Chapter 2001, Government Code. 

 SECTION 2.  Requires the office to implement the toll-free number under
Section 412.065, Labor Code, by January 1, 2000. 

SECTION 3.  Requires the office to implement the training classes under
Section 412.066, Labor Code, by January 1, 2000. 

SECTION 4.  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, 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 5.Makes application of this Act prospective.

SECTION 6. Effective date: September 1, 1999.

SECTION 7.Emergency clause.