By Zaffirini                                          S.B. No. 1590
         76R5068 PB-D                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to the investigation and prosecution of fraud in the
 1-3     workers' compensation program for state employees; providing
 1-4     administrative penalties.
 1-6           SECTION 1.  Chapter 412, Labor Code, is amended by adding
 1-7     Subchapter G to read as follows:
 1-9                         REGARDING MEDICAL BENEFITS
1-10           Sec. 412.061.  DEFINITIONS.  In this subchapter:
1-11                 (1)  "Fraudulent act" means any act that violates a
1-12     penal law and is committed or attempted to be committed to obtain
1-13     or deny a workers' compensation medical benefit or payment for a
1-14     service provided in conjunction with a medical benefit.
1-15                 (2)  "Program" means the workers' compensation program
1-16     for state employees administered under Chapter 501.
1-17           Sec. 412.062.  CLAIM REVIEW BY OFFICE.  (a)  The office shall
1-18     conduct periodic reviews of claims for medical benefits as
1-19     necessary to determine the medical necessity and appropriateness of
1-20     the provided services.
1-21           (b)  In addition to the periodic reviews under Subsection
1-22     (a), the office shall conduct a claim review on each claim:
1-23                 (1)  that involves the receipt of psychiatric services;
1-24     or
 2-1                 (2)  in which the use of prescription drugs appears
 2-2     inappropriate.
 2-3           (c)  The office may withhold payments to be made to a health
 2-4     care  provider who does not provide, in the manner prescribed by
 2-5     the risk management board, documentation requested by the office
 2-6     necessary to verify a medical service related to a claim.
 2-7           Sec. 412.063.  CLAIMS AUDIT.  (a)  The director shall conduct
 2-8     an annual audit of claims for medical benefits as provided by this
 2-9     section.
2-10           (b)  The director shall randomly select claims submitted
2-11     under the program  for medical benefits, in a percentage of total
2-12     claims made during the year set by the board as necessary to obtain
2-13     a statistically significant sample, and shall audit the claims to
2-14     determine the validity of the claims.  In performing the audit, the
2-15     director shall interview the claimant in person or by telephone to
2-16     ensure that the health care services were received.  The audit must
2-17     also include a review of the claimant's medical history and medical
2-18     records.
2-19           (c)  The director may contract with a private entity  for
2-20     performance of the audit.
2-21           Sec. 412.064.  PREPAYMENT AUDIT.  The board by rule shall
2-22     require each person who processes claims for the office to
2-23     implement a prepayment audit procedure that:
2-24                 (1)  compares the diagnosis code submitted on the bill
2-25     for health care services to the code for the injured body part; and
2-26                 (2)  verifies the appropriateness of the diagnosis code
2-27     for the health care services provided.
 3-1           Sec. 412.065.  TOLL-FREE TELEPHONE NUMBER.  (a)  The office
 3-2     shall maintain a toll-free telephone number for the receipt of
 3-3     complaints regarding fraudulent acts by claimants or health care
 3-4     providers.
 3-5           (b)  The director shall provide claimants with information
 3-6     regarding the telephone number when a workers' compensation claim
 3-7     is submitted and periodically shall notify state employees of the
 3-8     telephone number in a manner determined to be appropriate by the
 3-9     office.
3-10           Sec. 412.066.  TRAINING CLASSES IN FRAUD PREVENTION.
3-11     (a)  The director shall implement annual training classes for
3-12     appropriate members of the staff of state agencies and contractors
3-13     or administering firms who process workers' compensation claims
3-14     submitted under the program for medical benefits to assist those
3-15     persons in identifying potential misrepresentation or fraud in the
3-16     operation of the program.
3-17           (b)  The director may contract with the Health and Human
3-18     Services Commission or with a private entity  for the operation of
3-19     the training classes.
3-20           Sec. 412.067.  ACTION BY OFFICE; COOPERATION REQUIRED.
3-21     (a)  If the office determines that a health care provider has
3-22     obtained payments under the program through a fraudulent act, the
3-23     office shall take action against the provider as provided by this
3-24     subchapter.  The office shall report any action taken in writing to
3-25     the commission.
3-26           (b)  Each state agency and health care provider who
3-27     participates in the program shall, as a condition of that
 4-1     participation, cooperate fully in any investigation of a fraudulent
 4-2     act that is conducted by the director, including providing to the
 4-3     director timely access to patient medical records determined by the
 4-4     director to be necessary to conduct an investigation.
 4-5           (c)  Notwithstanding any other law regarding the
 4-6     confidentiality of patient records, the director is entitled to
 4-7     access to patient medical records for the limited purpose provided
 4-8     by this subchapter and is a "governmental agency" for purposes of
 4-9     Section 5.08, Medical Practice Act (Article 4495b, Vernon's Texas
4-10     Civil Statutes).  A medical record submitted to the director under
4-11     this subsection is confidential and is not subject to disclosure
4-12     under Chapter 552, Government Code.
4-13           Sec. 412.068.  FRAUDULENT ACTS BY PROVIDERS.  (a)  The
4-14     director shall investigate each complaint alleging a fraudulent act
4-15     made by a claimant, a health care provider, or a state agency
4-16     regarding a health care provider who is participating in the
4-17     program.
4-18           (b)  If, after initial investigation, the director determines
4-19     that the complaint is unfounded, the director shall terminate the
4-20     investigation.  If the director determines that further action is
4-21     warranted, the director shall refer the complaint to the risk
4-22     management board for appropriate sanctions or administrative action
4-23     and shall provide information regarding the complaint and the
4-24     action taken to the commission.
4-25           (c)  Sanctions against a health care provider may include:
4-26                 (1)  exclusion from participation as a provider in the
4-27     program;
 5-1                 (2)  withholding during the pendency of an
 5-2     investigation payments to be made to the provider;
 5-3                 (3)  recoupment of unauthorized payments from future
 5-4     payments made to the provider; and
 5-5                 (4)  restrictions on provider reimbursement.
 5-6           Sec. 412.069.  ADMINISTRATIVE PENALTY.  (a)  The risk
 5-7     management board may impose an administrative penalty on a health
 5-8     care provider or claimant who commits a fraudulent act in obtaining
 5-9     a payment or a medical benefit under Chapter 501.
5-10           (b)  The amount of the penalty may not exceed $10,000, and
5-11     each day a violation continues or occurs is a separate violation
5-12     for the purpose of imposing a penalty.  The amount shall be based
5-13     on:
5-14                 (1)  the seriousness of the violation, including the
5-15     nature, circumstances, extent, and gravity of the violation;
5-16                 (2)  the history of previous violations;
5-17                 (3)  the amount necessary to deter a future violation;
5-18                 (4)  efforts to correct the violation; and
5-19                 (5)  any other matter that justice may require.
5-20           (c)  The enforcement of the penalty may be stayed during the
5-21     time the order is under judicial review if the person pays the
5-22     penalty to the clerk of the court or files a supersedeas bond with
5-23     the court in the amount of the penalty.  A person who cannot afford
5-24     to pay the penalty or file the bond may stay the enforcement by
5-25     filing an affidavit in the manner required by the Texas Rules of
5-26     Civil Procedure for a party who cannot afford to file security for
5-27     costs, subject to the right of the board to contest the affidavit
 6-1     as provided by those rules.
 6-2           (d)  The attorney general may sue to collect the penalty.
 6-3           (e)  Except as otherwise provided by this subsection, an
 6-4     administrative penalty collected under this section shall be
 6-5     transmitted by the office to the comptroller for deposit in the
 6-6     general revenue fund.  The comptroller shall deposit an amount not
 6-7     to exceed $200,000 per state fiscal biennium in the state workers'
 6-8     compensation account in the general revenue fund to be used for the
 6-9     detection and prosecution of fraud under this subchapter.
6-10           (f)  A proceeding to impose the penalty is considered to be a
6-11     contested case under Chapter 2001, Government Code.
6-12           SECTION 2.  The State Office of Risk Management shall
6-13     implement the toll-free telephone number required under Section
6-14     412.065, Labor Code, as added by this  Act, not later than January
6-15     1, 2000.
6-16           SECTION 3.  The State Office of Risk Management shall
6-17     implement the training classes required under Section 412.066,
6-18     Labor Code, as added by this  Act, not later than January 1, 2000.
6-19           SECTION 4.  The risk management board of the State Office of
6-20     Risk Management shall conduct a study regarding the use of fraud
6-21     detection software.  The study may include an analysis of the fraud
6-22     detection program used by the Health and Human Services Commission
6-23     under Chapter 22, Human Resources Code, for the detection of fraud
6-24     in the Medicaid program.  The risk management board shall report
6-25     the results of its study to the 77th Legislature not later than
6-26     February 1, 2001.
6-27           SECTION 5.  This Act applies only to an administrative
 7-1     penalty assessed for conduct that occurs on or after the effective
 7-2     date of this Act. An administrative penalty assessed for conduct
 7-3     that occurred before the effective date of this Act is governed by
 7-4     the law as it existed immediately before the effective date of this
 7-5     Act, and that law is continued in effect for that purpose.
 7-6           SECTION 6.  This Act takes effect September 1, 1999.
 7-7           SECTION 7.  The importance of this legislation and the
 7-8     crowded condition of the calendars in both houses create an
 7-9     emergency and an imperative public necessity that the
7-10     constitutional rule requiring bills to be read on three several
7-11     days in each house be suspended, and this rule is hereby suspended.