80R9092 YDB-D

By: Turner H.B. No. 2877

A BILL TO BE ENTITLED

AN ACT

relating to the office of inspector general.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 531.001, Government Code, is amended by adding Subdivision (4-a) to read as follows:

(4-a) "Office of inspector general" means the office of inspector general established under Section 531.102.

SECTION 2. Section 531.008(c), Government Code, is amended to read as follows:

(c) The executive commissioner shall establish the following divisions and offices within the commission:

(1) the eligibility services division to make eligibility determinations for services provided through the commission or a health and human services agency related to:

(A) the child health plan program;

(B) the financial assistance program under Chapter 31, Human Resources Code;

(C) the medical assistance program under Chapter 32, Human Resources Code;

(D) the nutritional assistance programs under Chapter 33, Human Resources Code;

(E) long-term care services, as defined by Section 22.0011, Human Resources Code;

(F) community-based support services identified or provided in accordance with Section 531.02481; and

(G) other health and human services programs, as appropriate;

(2) [the office of inspector general to perform fraud and abuse investigation and enforcement functions as provided by Subchapter C and other law;]

[(3)] the office of the ombudsman to:

(A) provide dispute resolution services for the commission and the health and human services agencies; and

(B) perform consumer protection functions related to health and human services;

(3) [(4)] a purchasing division as provided by Section 531.017; and

(4) [(5)] an internal audit division to conduct a program of internal auditing in accordance with [Government Code,] Chapter 2102.

SECTION 3. Sections 531.101(a) and (b), Government Code, are amended to read as follows:

(a) The office of inspector general [commission] may grant an award to an individual who reports activity that constitutes fraud or abuse of funds in the state Medicaid program or reports overcharges in the program if the office [commission] determines that the disclosure results in the recovery of an administrative penalty imposed under Section 32.039, Human Resources Code. The office [commission] may not grant an award to an individual in connection with a report if the office [commission] or attorney general had independent knowledge of the activity reported by the individual.

(b) The office of inspector general [commission] shall determine the amount of an award. The award may not exceed five percent of the amount of the administrative penalty imposed under Section 32.039, Human Resources Code, that resulted from the individual's disclosure. In determining the amount of the award, the office [commission] shall consider how important the disclosure is in ensuring the fiscal integrity of the program. The office [commission] may also consider whether the individual participated in the fraud, abuse, or overcharge.

SECTION 4. Section 531.102, Government Code, is amended by amending Subsections (a) through (h) and adding Subsections (a-2), (a-3), (h-1), and (l) through (n) to read as follows:

(a) The Office of Inspector General [commission, through the commission's office of inspector general,] is an agency of this state responsible for the investigation of fraud, waste, and abuse, the enforcement of the laws protecting the public safety, the prevention and detection of crime [responsible for the investigation of fraud and abuse] in the provision of health and human services, and the enforcement of state law relating to the provision of those services.

(a-1) The office of inspector general is administratively attached to the commission. As necessary for the office to meet its responsibilities under this subchapter or other law, the commission shall:

(1) provide the office with administrative support services, including staff, from the commission and from the health and human services agencies;

(2) enter into a service level agreement with the office that establishes the performance standards and deliverables with regard to administrative support by the commission and together with the office review the agreement at least annually to ensure that services and deliverables are provided in accordance with the agreement; and

(3) request or apply for, and receive for the office, any appropriation or other money from this state or the federal government in accordance with Subsection (n).

(a-2) The office [commission] may obtain any information or technology necessary to enable the office to meet its responsibilities under this subchapter or other law.

(a-3) [(a-1)] The governor shall appoint an inspector general to serve as director of the office. The inspector general serves a two-year [one-year] term that expires on February 1 of each odd-numbered year.

(b) The [commission, in consultation with the] inspector general[,] shall set clear objectives, priorities, and performance standards for the office that emphasize:

(1) coordinating investigative efforts to aggressively recover money;

(2) allocating resources to cases that have the strongest supportive evidence and the greatest potential for recovery of money; and

(3) maximizing opportunities for referral of cases to the office of the attorney general in accordance with Section 531.103.

(c) The inspector general [commission] shall train office staff whose duties may involve health and human services matters to enable the staff to pursue priority Medicaid and other health and human services fraud, waste, and abuse cases as necessary.

(d) The commission shall [may] require employees of health and human services agencies to provide assistance to the office of inspector general in connection with the office's duties relating to the investigation of fraud, waste, and abuse in the provision of health and human services. The office is entitled to access to any information maintained by a health and human services agency or any other state agency, including internal records, relevant to the functions of the office.

(e) The [commission, in consultation with the] inspector general[,] by rule shall set specific claims criteria that, when met, require the office to begin an investigation.

(f)(1) If the inspector general or any health and human services agency [commission] receives a complaint of Medicaid fraud, waste, or abuse from any source, the office of inspector general must conduct an integrity review to determine whether there is sufficient basis to warrant a full investigation. The commission or a health and human services agency shall immediately forward to the office a complaint received by the commission or the agency under this subdivision. An integrity review must begin not later than the 30th day after the date the inspector general [commission] receives a complaint directly or from the commission or a health and human services agency or has reason to believe that fraud, waste, or abuse has occurred. An integrity review shall be completed not later than the 90th day after it began.

(2) If the findings of an integrity review give the office of inspector general reason to believe that an incident [of fraud or abuse] involving possible criminal conduct has occurred in the Medicaid program, the office must take the following action, as appropriate, not later than the 30th day after the completion of the integrity review:

(A) if a provider is suspected of [fraud or abuse involving] criminal conduct, the office must refer the case to the state's Medicaid fraud control unit, provided that the criminal referral does not preclude the office from continuing its investigation of the provider, which investigation may lead to the imposition of appropriate administrative or civil sanctions; or

(B) if there is reason to believe that a recipient has defrauded the Medicaid program, the inspector general [office] may conduct a full investigation of the suspected fraud.

(g)(1) Whenever the office of inspector general learns or has reason to suspect that a provider's records in the Medicaid program are being withheld, concealed, destroyed, fabricated, or in any way falsified, the office shall immediately refer the case to the state's Medicaid fraud control unit. However, such criminal referral does not preclude the office from continuing its investigation of the provider, which investigation may lead to the imposition of appropriate administrative or civil sanctions.

(2) In addition to other instances authorized under state or federal law, the office of inspector general shall impose without prior notice a hold on payment of claims for reimbursement submitted by a provider to compel production of records or when requested by the state's Medicaid fraud control unit, as applicable. The office must notify the provider of the hold on payment not later than the fifth working day after the date the payment hold is imposed.

(3) On timely written request by a provider subject to a hold on payment under Subdivision (2), other than a hold requested by the state's Medicaid fraud control unit, the office of inspector general shall file a request with the State Office of Administrative Hearings for an expedited administrative hearing regarding the hold. The provider must request an expedited hearing under this subdivision not later than the 10th day after the date the provider receives notice from the office under Subdivision (2).

(4) The inspector general [commission] shall adopt rules that allow a provider subject to a hold on payment under Subdivision (2), other than a hold requested by the state's Medicaid fraud control unit, to seek an informal resolution of the issues identified by the office of inspector general in the notice provided under that subdivision. A provider must seek an informal resolution under this subdivision not later than the deadline prescribed by Subdivision (3). A provider's decision to seek an informal resolution under this subdivision does not extend the time by which the provider must request an expedited administrative hearing under Subdivision (3). However, a hearing initiated under Subdivision (3) shall be stayed at the office's request until the informal resolution process is completed.

(5) The inspector general [office] shall, in consultation with the state's Medicaid fraud control unit, establish guidelines under which holds on payment or program exclusions:

(A) may permissively be imposed on a provider; or

(B) shall automatically be imposed on a provider.

(h) In addition to performing functions and duties otherwise provided by law, the office of inspector general may:

(1) assess administrative penalties otherwise authorized by law on behalf of the commission or a health and human services agency and retain from amounts collected funds sufficient to cover investigative and collection costs;

(2) request that the attorney general obtain an injunction to prevent a person from disposing of an asset identified by the office as potentially subject to recovery by the office due to the person's fraud or abuse;

(3) provide for coordination between the office and special investigative units formed by managed care organizations under Section 531.113 or entities with which managed care organizations contract under that section;

(4) audit the use and effectiveness of state or federal health and human services funds, including contract and grant funds, administered by a person or state [agency receiving the funds from a] health and human services agency;

(5) conduct investigations relating to the funds described by Subdivision (4); [and]

(6) recommend policies promoting economical and efficient administration of the funds described by Subdivision (4) and the prevention and detection of fraud, waste, and abuse in administration of those funds;

(7) commission and employ peace officers to carry out duties within the scope of the duties of office of inspector general; and

(8) conduct reviews and inspections to protect the public and to detect and prevent fraud, waste, and abuse in the provision of health and human services.

(h-1) The number of commissioned peace officers employed by the office of inspector general may not exceed 10 percent of the office's full-time equivalent positions. A commissioned peace officer or other designated law enforcement officer employed by the office is not entitled to supplemental benefits from the law enforcement and custodial officer supplemental retirement fund under Title 8.

(l) The inspector general shall conduct internal affairs investigations in instances of fraud, waste, and abuse and in instances of misconduct by employees, contractors, subcontractors, and vendors.

(m) Notwithstanding Section 531.0055(e) or other law, the inspector general may adopt rules as necessary to administer the functions of the office of inspector general.

(n) The inspector general shall submit a budget in accordance with the General Appropriations Act and general law. The inspector general shall submit to the commission a legislative appropriations request or an operating budget, as appropriate. The request or budget submitted is not subject to review, alteration, or modification by the commission or executive commissioner before submission to the Governor's Office of Budget, Planning, and Policy and the Legislative Budget Board.

SECTION 5. Section 531.1021(a), Government Code, is amended to read as follows:

(a) The [office of] inspector general, in connection with an investigation conducted by the office of inspector general, [may request that the commissioner or the commissioner's designee approve the issuance by the office of a subpoena in connection with an investigation conducted by the office. If the request is approved, the office] may issue a subpoena or request a grand jury subpoena to compel the attendance of a relevant witness or the production, for inspection or copying, of relevant evidence that is in this state.

SECTION 6. Sections 531.103(a), (c), and (d), Government Code, are amended to read as follows:

(a) The [commission, acting through the commission's] office of inspector general[,] and the office of the attorney general shall enter into a memorandum of understanding to develop and implement joint written procedures for processing cases of suspected fraud, waste, or abuse, as those terms are defined by state or federal law, or other violations of state or federal law under the state Medicaid program or other program administered by the commission or a health and human services agency, including the financial assistance program under Chapter 31, Human Resources Code, a nutritional assistance program under Chapter 33, Human Resources Code, and the child health plan program. The memorandum of understanding shall require:

(1) the office of inspector general and the office of the attorney general to set priorities and guidelines for referring cases to appropriate state agencies for investigation, prosecution, or other disposition to enhance deterrence of fraud, waste, abuse, or other violations of state or federal law, including a violation of Chapter 102, Occupations Code, in the programs and maximize the imposition of penalties, the recovery of money, and the successful prosecution of cases;

(1-a) the office of inspector general to refer each case of suspected provider fraud, waste, or abuse to the office of the attorney general not later than the 20th business day after the date the office of inspector general determines that the existence of fraud, waste, or abuse is reasonably indicated;

(1-b) the office of the attorney general to take appropriate action in response to each case referred to the attorney general, which action may include direct initiation of prosecution, with the consent of the appropriate local district or county attorney, direct initiation of civil litigation, referral to an appropriate United States attorney, a district attorney, or a county attorney, or referral to a collections agency for initiation of civil litigation or other appropriate action;

(2) the office of inspector general to keep detailed records for cases processed by that office or the office of the attorney general, including information on the total number of cases processed and, for each case:

(A) the agency and division to which the case is referred for investigation;

(B) the date on which the case is referred; and

(C) the nature of the suspected fraud, waste, or abuse;

(3) the office of inspector general to notify each appropriate division of the office of the attorney general of each case referred by the office of inspector general;

(4) the office of the attorney general to ensure that information relating to each case investigated by that office is available to each division of the office with responsibility for investigating suspected fraud, waste, or abuse;

(5) the office of the attorney general to notify the office of inspector general of each case the attorney general declines to prosecute or prosecutes unsuccessfully;

(6) representatives of the office of inspector general and of the office of the attorney general to meet not less than quarterly to share case information and determine the appropriate agency and division to investigate each case; and

(7) the office of inspector general and the office of the attorney general to submit information requested by the comptroller about each resolved case for the comptroller's use in improving fraud detection.

(c) The office of inspector general [commission] and the office of the attorney general shall jointly prepare and submit a semiannual report to the governor, lieutenant governor, speaker of the house of representatives, presiding officers of each house and senate committee having jurisdiction over health and human services programs, and comptroller concerning the activities of the office of the attorney general and the office of inspector general [those agencies] in detecting and preventing fraud, waste, and abuse under the state Medicaid program or other program administered by the commission or a health and human services agency. The report may be consolidated with any other report relating to the same subject matter the office of inspector general [commission] or office of the attorney general is required to submit under other law.

(d) The office of inspector general [commission] and the office of the attorney general may not assess or collect investigation and attorney's fees on behalf of any state agency unless the office of inspector general, the office of the attorney general, or another [other] state agency collects a penalty, restitution, or other reimbursement payment to the state.

SECTION 7. Section 531.104(a), Government Code, is amended to read as follows:

(a) The office of inspector general [commission] and the attorney general shall execute a memorandum of understanding under which the office [commission] shall provide investigative support as required to the attorney general in connection with cases under Subchapter B, Chapter 36, Human Resources Code. Under the memorandum of understanding, the office [commission] shall assist in performing preliminary investigations and ongoing investigations for actions prosecuted by the attorney general under Subchapter C, Chapter 36, Human Resources Code.

SECTION 8. Section 531.105, Government Code, is amended to read as follows:

Sec. 531.105. FRAUD DETECTION TRAINING. (a) The office of inspector general [commission] shall develop and implement a program to provide annual training to contractors who process Medicaid claims and appropriate staff of the health and human services agencies [Texas Department of Health and the Texas Department of Human Services] in identifying potential cases of fraud, waste, or abuse under the state Medicaid program. The training provided to the contractors and staff must include clear criteria that specify:

(1) the circumstances under which a person should refer a potential case to the office [commission]; and

(2) the time by which a referral should be made.

(b) The commission and each health and human services agency [Texas Department of Health and the Texas Department of Human Services], in cooperation with the office of inspector general [commission], shall periodically set a goal of the number of potential cases of fraud, waste, or abuse under the state Medicaid program that each agency will attempt to identify and refer to the office [commission]. The office [commission] shall include information on the agencies' goals and the success of each agency in meeting the agency's goal in the report required by Section 531.103(c).

SECTION 9. Sections 531.106(a), (b), (d), (e), (f), and (g), Government Code, are amended to read as follows:

(a) The office of inspector general [commission] shall use learning or neural network technology to identify and deter fraud in the Medicaid program throughout this state.

(b) The office of inspector general [commission] shall contract with a private or public entity to develop and implement the technology. The office [commission] may require the entity it contracts with to install and operate the technology at locations specified by the office [commission, including commission offices].

(d) The office of inspector general [commission] shall require each health and human services agency that performs any aspect of the state Medicaid program to participate in the implementation and use of the technology.

(e) The office of inspector general [commission] shall maintain all information necessary to apply the technology to claims data covering a period of at least two years.

(f) Cases [The commission shall refer cases] identified by the technology shall be referred to the [commission's] office of inspector general [investigations and enforcement] or the office of the attorney general, as appropriate.

(g) Each month, the learning or neural network technology implemented under this section must match bureau of vital statistics death records with Medicaid claims filed by a provider. If the commission or the office of inspector general determines that a provider has filed a claim for services provided to a person after the person's date of death, as determined by the bureau of vital statistics death records, [the commission shall refer] the case shall be referred for investigation to the office of inspector general or the office of the attorney general, as appropriate [to the commission's office of investigations and enforcement].

SECTION 10. Section 531.1061, Government Code, is amended to read as follows:

Sec. 531.1061. FRAUD INVESTIGATION TRACKING SYSTEM. (a) The office of inspector general [commission] shall use an automated fraud investigation tracking system [through the commission's office of investigations and enforcement] to monitor the progress of an investigation of suspected fraud, waste, abuse, or insufficient quality of care under the state Medicaid program.

(b) For each case of suspected fraud, waste, abuse, or insufficient quality of care identified by the learning or neural network technology required under Section 531.106, the automated fraud investigation tracking system must:

(1) receive electronically transferred records relating to the identified case from the learning or neural network technology;

(2) record the details and monitor the status of an investigation of the identified case, including maintaining a record of the beginning and completion dates for each phase of the case investigation;

(3) generate documents and reports related to the status of the case investigation; and

(4) generate standard letters to a provider regarding the status or outcome of an investigation.

(c) The office of inspector general may [commission shall] require each health and human services agency that performs any aspect of the state Medicaid program to participate in the implementation and use of the automated fraud investigation tracking system.

SECTION 11. Section 531.1062(a), Government Code, is amended to read as follows:

(a) The office of inspector general [commission] shall use an automated recovery monitoring system to monitor the collections process for a settled case of fraud, waste, abuse, or insufficient quality of care under the state Medicaid program.

SECTION 12. Sections 531.107(a), (b), and (f), Government Code, are amended to read as follows:

(a) The Medicaid and Public Assistance Fraud Oversight Task Force advises and assists the [commission and the commission's] office of inspector general [investigations and enforcement] in improving the efficiency of fraud investigations and collections.

(b) The task force is composed of a representative of the:

(1) attorney general's office, appointed by the attorney general;

(2) comptroller's office, appointed by the comptroller;

(3) Department of Public Safety, appointed by the public safety director;

(4) state auditor's office, appointed by the state auditor;

(5) office of inspector general [commission], appointed by the inspector general [commissioner of health and human services];

(6) [Texas] Department of Aging and Disability [Human] Services, appointed by the commissioner of aging and disability [human] services;

(7) Texas Department of Insurance, appointed by the commissioner of insurance; and

(8) [Texas] Department of State Health Services, appointed by the commissioner of state [public] health services.

(f) At least once each fiscal quarter, the [commission's] office of inspector general [investigations and enforcement] shall provide to the task force:

(1) information detailing:

(A) the number of fraud referrals made to the office and the origin of each referral;

(B) the time spent investigating each case;

(C) the number of cases investigated each month, by program and region;

(D) the dollar value of each fraud case that results in a criminal conviction; and

(E) the number of cases the office rejects and the reason for rejection, by region; and

(2) any additional information the task force requires.

SECTION 13. Sections 531.108 and 531.109, Government Code, are amended to read as follows:

Sec. 531.108. FRAUD PREVENTION. (a) The [commission's] office of inspector general [investigations and enforcement] shall compile and disseminate accurate information and statistics relating to:

(1) fraud prevention; and

(2) post-fraud referrals received and accepted or rejected from the office's [commission's] case management system or the case management system of a health and human services agency.

(b) The office of inspector general [commission] shall:

(1) aggressively publicize successful fraud prosecutions and fraud-prevention programs through all available means, including the use of statewide press releases [issued in coordination with the Texas Department of Human Services]; and

(2) ensure that a toll-free hotline for reporting suspected fraud in programs administered by the office, the commission, or a health and human services agency is maintained and promoted[, either] by the office, the commission, or [by] a health and human services agency.

(c) The office of inspector general [commission] shall develop a cost-effective method of identifying applicants for public assistance in counties bordering other states and in metropolitan areas selected by the office [commission] who are already receiving benefits in other states. If economically feasible, the office [commission] may develop a computerized matching system.

(d) The office of inspector general [commission] shall:

(1) verify automobile information that is used as criteria for eligibility; and

(2) establish a computerized matching system with the Texas Department of Criminal Justice to prevent an incarcerated individual from illegally receiving public assistance benefits administered by the commission.

(e) The office of inspector general [commission] shall submit to the governor and Legislative Budget Board a semiannual report on the results of computerized matching of office and commission information with information from neighboring states, if any, and information from the Texas Department of Criminal Justice. The report may be consolidated with any other report relating to the same subject matter the office [commission] is required to submit under other law.

Sec. 531.109. SELECTION AND REVIEW OF CLAIMS. (a) The office of inspector general [commission] shall annually select and review a random, statistically valid sample of all claims for reimbursement under the state Medicaid program, including the vendor drug program, for potential cases of fraud, waste, or abuse.

(b) In conducting the annual review of claims under Subsection (a), the office of inspector general [commission] may directly contact a recipient by telephone or in person, or both, to verify that the services for which a claim for reimbursement was submitted by a provider were actually provided to the recipient.

(c) Based on the results of the annual review of claims, the office of inspector general and the commission shall determine the types of claims at which office and commission resources for fraud, waste, and abuse detection should be primarily directed.

SECTION 14. Sections 531.110(a), (c), (d), (e), and (f), Government Code, are amended to read as follows:

(a) The office of inspector general [commission] shall conduct electronic data matches for a recipient of assistance under the state Medicaid program at least quarterly to verify the identity, income, employment status, and other factors that affect the eligibility of the recipient.

(c) The commission and each health and human services agency [Texas Department of Human Services] shall cooperate with the office of inspector general [commission] by providing data or any other assistance necessary to conduct the electronic data matches required by this section.

(d) The office of inspector general [commission] may contract with a public or private entity to conduct the electronic data matches required by this section.

(e) The office of inspector general [commission], or a health and human services agency designated by the office [commission], by rule shall establish procedures to verify the electronic data matches conducted by the office [commission] under this section. Not later than the 20th day after the date the electronic data match is verified, the commission or the health and human services agency, as applicable, [Texas Department of Human Services] shall remove from eligibility a recipient who is determined to be ineligible for assistance under the state Medicaid program.

(f) The office of inspector general [commission] shall report biennially to the legislature the results of the electronic data matching program. The report must include a summary of the number of applicants who were removed from eligibility for assistance under the state Medicaid program as a result of an electronic data match conducted under this section.

SECTION 15. Section 531.111, Government Code, is amended to read as follows:

Sec. 531.111. FRAUD DETECTION TECHNOLOGY. The office of inspector general [commission] may contract with a contractor who specializes in developing technology capable of identifying patterns of fraud exhibited by Medicaid recipients to:

(1) develop and implement the fraud detection technology; and

(2) determine if a pattern of fraud by Medicaid recipients is present in the recipients' eligibility files maintained by the commission or a health and human services agency [Texas Department of Human Services].

SECTION 16. Section 531.113, Government Code, is amended to read as follows:

Sec. 531.113. MANAGED CARE ORGANIZATIONS: SPECIAL INVESTIGATIVE UNITS OR CONTRACTS. (a) Each managed care organization that provides or arranges for the provision of health care services to an individual under a government-funded program, including the Medicaid program and the child health plan program, shall:

(1) establish and maintain a special investigative unit within the managed care organization to investigate fraudulent claims and other types of program waste or abuse by recipients and service providers; or

(2) contract with another entity for the investigation of fraudulent claims and other types of program waste or abuse by recipients and service providers.

(b) Each managed care organization subject to this section shall adopt a plan to prevent and reduce fraud, waste, and abuse and annually file that plan with the [commission's] office of inspector general for approval. The plan must include:

(1) a description of the managed care organization's procedures for detecting and investigating possible acts of fraud, waste, or abuse;

(2) a description of the managed care organization's procedures for the mandatory reporting of possible acts of fraud, waste, or abuse to the [commission's] office of inspector general;

(3) a description of the managed care organization's procedures for educating and training personnel to prevent fraud, waste, and abuse;

(4) the name, address, telephone number, and fax number of the individual responsible for carrying out the plan;

(5) a description or chart outlining the organizational arrangement of the managed care organization's personnel responsible for investigating and reporting possible acts of fraud, waste, or abuse;

(6) a detailed description of the results of investigations of fraud, waste, and abuse conducted by the managed care organization's special investigative unit or the entity with which the managed care organization contracts under Subsection (a)(2); and

(7) provisions for maintaining the confidentiality of any patient information relevant to an investigation of fraud, waste, or abuse.

(c) If a managed care organization contracts for the investigation of fraudulent claims and other types of program waste or abuse by recipients and service providers under Subsection (a)(2), the managed care organization shall file with the [commission's] office of inspector general:

(1) a copy of the written contract;

(2) the names, addresses, telephone numbers, and fax numbers of the principals of the entity with which the managed care organization has contracted; and

(3) a description of the qualifications of the principals of the entity with which the managed care organization has contracted.

(d) The [commission's] office of inspector general may review the records of a managed care organization to determine compliance with this section.

(e) The inspector general [commissioner] shall adopt rules as necessary to accomplish the purposes of this section.

SECTION 17. Sections 531.114(b) and (g), Government Code, are amended to read as follows:

(b) If after an investigation the office of inspector general [commission] determines that a person violated Subsection (a), the office [commission] shall:

(1) notify the person of the alleged violation not later than the 30th day after the date the office [commission] completes the investigation and provide the person with an opportunity for a hearing on the matter; or

(2) refer the matter to the appropriate prosecuting attorney for prosecution.

(g) The inspector general [commission] shall adopt rules as necessary to implement this section.

SECTION 18. Section 531.115, Government Code, is amended to read as follows:

Sec. 531.115. FEDERAL FELONY MATCH. The office of inspector general [commission] shall develop and implement a system to cross-reference data collected for the programs listed under Section 531.008(c) with the list of fugitive felons maintained by the federal government.

SECTION 19. Section 533.001, Government Code, is amended by adding Subdivision (5-a) to read as follows:

(5-a) "Office of inspector general" means the office of inspector general established under Section 531.102.

SECTION 20. Section 533.005(a), Government Code, is amended to read as follows:

(a) A contract between a managed care organization and the commission for the organization to provide health care services to recipients must contain:

(1) procedures to ensure accountability to the state for the provision of health care services, including procedures for financial reporting, quality assurance, utilization review, and assurance of contract and subcontract compliance;

(2) capitation rates that ensure the cost-effective provision of quality health care;

(3) a requirement that the managed care organization provide ready access to a person who assists recipients in resolving issues relating to enrollment, plan administration, education and training, access to services, and grievance procedures;

(4) a requirement that the managed care organization provide ready access to a person who assists providers in resolving issues relating to payment, plan administration, education and training, and grievance procedures;

(5) a requirement that the managed care organization provide information and referral about the availability of educational, social, and other community services that could benefit a recipient;

(6) procedures for recipient outreach and education;

(7) a requirement that the managed care organization make payment to a physician or provider for health care services rendered to a recipient under a managed care plan not later than the 45th day after the date a claim for payment is received with documentation reasonably necessary for the managed care organization to process the claim, or within a period, not to exceed 60 days, specified by a written agreement between the physician or provider and the managed care organization;

(8) a requirement that the commission, on the date of a recipient's enrollment in a managed care plan issued by the managed care organization, inform the organization of the recipient's Medicaid certification date;

(9) a requirement that the managed care organization comply with Section 533.006 as a condition of contract retention and renewal;

(10) a requirement that the managed care organization provide the information required by Section 533.012 and otherwise comply and cooperate with the [commission's] office of inspector general;

(11) a requirement that the managed care organization's usages of out-of-network providers or groups of out-of-network providers may not exceed limits for those usages relating to total inpatient admissions, total outpatient services, and emergency room admissions determined by the commission;

(12) if the commission finds that a managed care organization has violated Subdivision (11), a requirement that the managed care organization reimburse an out-of-network provider for health care services at a rate that is equal to the allowable rate for those services, as determined under Sections 32.028 and 32.0281, Human Resources Code;

(13) a requirement that the organization use advanced practice nurses in addition to physicians as primary care providers to increase the availability of primary care providers in the organization's provider network;

(14) a requirement that the managed care organization reimburse a federally qualified health center or rural health clinic for health care services provided to a recipient outside of regular business hours, including on a weekend day or holiday, at a rate that is equal to the allowable rate for those services as determined under Section 32.028, Human Resources Code, if the recipient does not have a referral from the recipient's primary care physician; and

(15) a requirement that the managed care organization develop, implement, and maintain a system for tracking and resolving all provider appeals related to claims payment, including a process that will require:

(A) a tracking mechanism to document the status and final disposition of each provider's claims payment appeal;

(B) the contracting with physicians who are not network providers and who are of the same or related specialty as the appealing physician to resolve claims disputes related to denial on the basis of medical necessity that remain unresolved subsequent to a provider appeal; and

(C) the determination of the physician resolving the dispute to be binding on the managed care organization and provider.

SECTION 21. Section 533.012(c), Government Code, is amended to read as follows:

(c) The [commission's] office of inspector general [investigations and enforcement] shall review the information submitted under this section as appropriate in the investigation of fraud in the Medicaid managed care program. The comptroller may review the information in connection with the health care fraud study conducted by the comptroller.

SECTION 22. Section 2054.376(b), Government Code, is amended to read as follows:

(b) This subchapter does not apply to:

(1) the Department of Public Safety's use for criminal justice or homeland security purposes of a federal database or network;

(2) a Texas equivalent of a database or network described by Subdivision (1) that is managed by the Department of Public Safety;

(3) the uniform statewide accounting system, as that term is used in Subchapter C, Chapter 2101;

(4) the state treasury cash and treasury management system; [or]

(5) a database or network managed by the comptroller to:

(A) collect and process multiple types of taxes imposed by the state; or

(B) manage or administer fiscal, financial, revenue, and expenditure activities of the state under Chapter 403 and Chapter 404; or

(6) the use of a federal or state database or network by the office of inspector general established under Section 531.102 or by the Health and Human Services Commission for criminal justice purposes or to maintain information that is confidential by statute or under federal regulations.

SECTION 23. Section 32.003, Human Resources Code, is amended by adding Subdivision (5) to read as follows:

(5) "Office of inspector general" means the office established under Section 531.102, Government Code, that is responsible for the investigation, review, and audit of possible fraud, waste, and abuse in the provision of health and human services and the enforcement of state law relating to the provision of those services.

SECTION 24. Section 32.0291, Human Resources Code, is amended to read as follows:

Sec. 32.0291. PREPAYMENT REVIEWS AND POSTPAYMENT HOLDS. (a) Notwithstanding any other law, the office of inspector general or department may:

(1) perform a prepayment review of a claim for reimbursement under the medical assistance program to determine whether the claim involves fraud, waste, or abuse; and

(2) as necessary to perform that review, withhold payment of the claim for not more than five working days without notice to the person submitting the claim.

(b) Notwithstanding any other law, the office of inspector general [department] may impose a postpayment hold on payment of future claims submitted by a provider if the office [department] has reliable evidence that the provider has committed fraud, waste, abuse, or wilful misrepresentation regarding a claim for reimbursement under the medical assistance program. The office [department] must notify the provider of the postpayment hold not later than the fifth working day after the date the hold is imposed.

(c) On timely written request by a provider subject to a postpayment hold under Subsection (b), the office of inspector general [department] shall file a request with the State Office of Administrative Hearings for an expedited administrative hearing regarding the hold. The provider must request an expedited hearing under this subsection not later than the 10th day after the date the provider receives notice from the office of inspector general [department] under Subsection (b). The office of inspector general [department] shall discontinue the hold unless the office [department] makes a prima facie showing at the hearing that the evidence relied on by the office of inspector general [department] in imposing the hold is relevant, credible, and material to the issue of fraud, waste, abuse, or wilful misrepresentation.

(d) The inspector general [department] shall adopt rules that allow a provider subject to a postpayment hold under Subsection (b) to seek an informal resolution of the issues identified by the office of inspector general [department] in the notice provided under that subsection. A provider must seek an informal resolution under this subsection not later than the deadline prescribed by Subsection (c). A provider's decision to seek an informal resolution under this subsection does not extend the time by which the provider must request an expedited administrative hearing under Subsection (c). However, a hearing initiated under Subsection (c) shall be stayed at the office's [department's] request until the informal resolution process is completed.

SECTION 25. Section 32.032, Human Resources Code, is amended to read as follows:

Sec. 32.032. PREVENTION AND DETECTION OF FRAUD, WASTE, AND ABUSE. The inspector general [department] shall adopt reasonable rules for minimizing the opportunity for fraud, waste, and abuse, for establishing and maintaining methods for detecting and identifying situations in which a question of fraud, waste, or abuse in the program may exist, and for referring cases where fraud, waste, or abuse appears to exist to the appropriate law enforcement agencies for prosecution.

SECTION 26. Sections 32.0321(a) through (d), Human Resources Code, are amended to read as follows:

(a) The office of inspector general [department] by rule may recommend to the department and the department by rule may require that each provider of medical assistance in a provider type that has demonstrated significant potential for fraud, waste, or abuse to file with the department a surety bond in a reasonable amount. The office and the department by rule shall each require a provider of medical assistance to file with the department a surety bond in a reasonable amount if the office [department] identifies a pattern of suspected fraud, waste, or abuse involving criminal conduct relating to the provider's services under the medical assistance program that indicates the need for protection against potential future acts of fraud, waste, or abuse.

(b) The bond under Subsection (a) must be payable to the department to compensate the department for damages resulting from or penalties or fines imposed in connection with an act of fraud, waste, or abuse committed by the provider under the medical assistance program.

(c) Subject to Subsection (d) or (e), the office of inspector general and the department by rule may require each provider of medical assistance that establishes a resident's trust fund account to post a surety bond to secure the account. The bond must be payable to the department to compensate residents of the bonded provider for trust funds that are lost, stolen, or otherwise unaccounted for if the provider does not repay any deficiency in a resident's trust fund account to the person legally entitled to receive the funds.

(d) The office of inspector general and the department may not require the amount of a surety bond posted for a single facility provider under Subsection (c) to exceed the average of the total average monthly balance of all the provider's resident trust fund accounts for the 12-month period preceding the bond issuance or renewal date.

SECTION 27. Section 32.0322, Human Resources Code, is amended to read as follows:

Sec. 32.0322. CRIMINAL HISTORY RECORD INFORMATION. (a) The office of inspector general and the department may obtain from any law enforcement or criminal justice agency the criminal history record information that relates to a provider under the medical assistance program or a person applying to enroll as a provider under the medical assistance program.

(b) The office of inspector general [department] by rule shall establish criteria for revoking a provider's enrollment or denying a person's application to enroll as a provider under the medical assistance program based on the results of a criminal history check.

SECTION 28. Sections 32.033(d) through (h), Human Resources Code, are amended to read as follows:

(d) A separate and distinct cause of action in favor of the state is hereby created, and the office of inspector general [department] may, without written consent, take direct civil action in any court of competent jurisdiction. A suit brought under this section need not be ancillary to or dependent upon any other action.

(e) The [department's] right of recovery of the office of inspector general is limited to the amount of the cost of medical care services paid by the department. Other subrogation rights granted under this section are limited to the cost of the services provided.

(f) The inspector general [commissioner] may waive the [department's] right of recovery of the office of inspector general in whole or in part when the inspector general [commissioner] finds that enforcement would tend to defeat the purpose of public assistance.

(g) The office of inspector general [department] may designate an agent to collect funds the office [department] has a right to recover from third parties under this section. The department shall use any funds collected to pay costs of administering the medical assistance program.

(h) The inspector general [department] may adopt rules for the enforcement of the office's [its] right of recovery.

SECTION 29. Sections 32.039(c) through (r) and (u) through (x), Human Resources Code, are amended to read as follows:

(c) A person who commits a violation under Subsection (b) is liable to the department for:

(1) the amount paid, if any, as a result of the violation and interest on that amount determined at the rate provided by law for legal judgments and accruing from the date on which the payment was made; and

(2) payment of an administrative penalty, assessed by the office of inspector general, in [of] an amount not to exceed twice the amount paid, if any, as a result of the violation, plus an amount:

(A) not less than $5,000 or more than $15,000 for each violation that results in injury to an elderly person, as defined by Section 48.002(a)(1) [48.002(1)], a disabled person, as defined by Section 48.002(a)(8)(A) [48.002(8)(A)], or a person younger than 18 years of age; or

(B) not more than $10,000 for each violation that does not result in injury to a person described by Paragraph (A).

(d) Unless the provider submitted information to the department for use in preparing a voucher that the provider knew or should have known was false or failed to correct information that the provider knew or should have known was false when provided an opportunity to do so, this section does not apply to a claim based on the voucher if the department calculated and printed the amount of the claim on the voucher and then submitted the voucher to the provider for the provider's signature. In addition, the provider's signature on the voucher does not constitute fraud. The inspector general [department] shall adopt rules that establish a grace period during which errors contained in a voucher prepared by the department may be corrected without penalty to the provider.

(e) In determining the amount of the penalty to be assessed under Subsection (c)(2), the office of inspector general [department] shall consider:

(1) the seriousness of the violation;

(2) whether the person had previously committed a violation; and

(3) the amount necessary to deter the person from committing future violations.

(f) If after an examination of the facts the office of inspector general [department] concludes that the person committed a violation, the office [department] may issue a preliminary report stating the facts on which it based its conclusion, recommending that an administrative penalty under this section be imposed and recommending the amount of the proposed penalty.

(g) The office of inspector general [department] shall give written notice of the report to the person charged with committing the violation. The notice must include a brief summary of the facts, a statement of the amount of the recommended penalty, and a statement of the person's right to an informal review of the alleged violation, the amount of the penalty, or both the alleged violation and the amount of the penalty.

(h) Not later than the 10th day after the date on which the person charged with committing the violation receives the notice, the person may either give the office of inspector general [department] written consent to the report, including the recommended penalty, or make a written request for an informal review by the office [department].

(i) If the person charged with committing the violation consents to the penalty recommended by the office of inspector general [department] or fails to timely request an informal review, the office [department] shall assess the penalty. The office [department] shall give the person written notice of its action. The person shall pay the penalty not later than the 30th day after the date on which the person receives the notice.

(j) If the person charged with committing the violation requests an informal review as provided by Subsection (h), the office of inspector general [department] shall conduct the review. The office [department] shall give the person written notice of the results of the review.

(k) Not later than the 10th day after the date on which the person charged with committing the violation receives the notice prescribed by Subsection (j), the person may make to the office of inspector general [department] a written request for a hearing. The hearing must be conducted in accordance with Chapter 2001, Government Code.

(l) If, after informal review, a person who has been ordered to pay a penalty fails to request a formal hearing in a timely manner, the office of inspector general [department] shall assess the penalty. The office [department] shall give the person written notice of its action. The person shall pay the penalty not later than the 30th day after the date on which the person receives the notice.

(m) Within 30 days after the date on which the inspector general's [board's] order issued after a hearing under Subsection (k) becomes final as provided by Section 2001.144, Government Code, the person shall:

(1) pay the amount of the penalty;

(2) pay the amount of the penalty and file a petition for judicial review contesting the occurrence of the violation, the amount of the penalty, or both the occurrence of the violation and the amount of the penalty; or

(3) without paying the amount of the penalty, file a petition for judicial review contesting the occurrence of the violation, the amount of the penalty, or both the occurrence of the violation and the amount of the penalty.

(n) A person who acts under Subsection (m)(3) within the 30-day period may:

(1) stay enforcement of the penalty by:

(A) paying the amount of the penalty to the court for placement in an escrow account; or

(B) giving to the court a supersedeas bond that is approved by the court for the amount of the penalty and that is effective until all judicial review of the [department's] order of the inspector general is final; or

(2) request the court to stay enforcement of the penalty by:

(A) filing with the court a sworn affidavit of the person stating that the person is financially unable to pay the amount of the penalty and is financially unable to give the supersedeas bond; and

(B) giving a copy of the affidavit to the office of inspector general [commissioner] by certified mail.

(o) If the office of inspector general [commissioner] receives a copy of an affidavit under Subsection (n)(2), the office [commissioner] may file with the court, within five days after the date the copy is received, a contest to the affidavit. The court shall hold a hearing on the facts alleged in the affidavit as soon as practicable and shall stay the enforcement of the penalty on finding that the alleged facts are true. The person who files an affidavit has the burden of proving that the person is financially unable to pay the amount of the penalty and to give a supersedeas bond.

(p) If the person charged does not pay the amount of the penalty and the enforcement of the penalty is not stayed, the office of inspector general [department] may forward the matter to the attorney general for enforcement of the penalty and interest as provided by law for legal judgments. An action to enforce a penalty order under this section must be initiated in a court of competent jurisdiction in Travis County or in the county in which the violation was committed.

(q) Judicial review of an [a department] order or review by the office of inspector general under this section assessing a penalty is under the substantial evidence rule. A suit may be initiated by filing a petition with a district court in Travis County, as provided by Subchapter G, Chapter 2001, Government Code.

(r) If a penalty is reduced or not assessed, the department shall remit to the person the appropriate amount plus accrued interest if the penalty has been paid or the office of inspector general shall execute a release of the bond if a supersedeas bond has been posted. The accrued interest on amounts remitted by the department under this subsection shall be paid at a rate equal to the rate provided by law for legal judgments and shall be paid for the period beginning on the date the penalty is paid to the department under this section and ending on the date the penalty is remitted.

(u) Except as provided by Subsection (w), a person found liable for a violation under Subsection (c) that resulted in injury to an elderly person, as defined by Section 48.002(a)(1), a disabled person, as defined by Section 48.002(a)(8)(A), or a person younger than 18 years of age may not provide or arrange to provide health care services under the medical assistance program for a period of 10 years. The inspector general [department] by rule may provide for a period of ineligibility longer than 10 years. The period of ineligibility begins on the date on which the determination that the person is liable becomes final.

(v) Except as provided by Subsection (w), a person found liable for a violation under Subsection (c) that did not result in injury to an elderly person, as defined by Section 48.002(a)(1), a disabled person, as defined by Section 48.002(a)(8)(A), or a person younger than 18 years of age may not provide or arrange to provide health care services under the medical assistance program for a period of three years. The inspector general [department] by rule may provide for a period of ineligibility longer than three years. The period of ineligibility begins on the date on which the determination that the person is liable becomes final.

(w) The inspector general [department] by rule may prescribe criteria under which a person described by Subsection (u) or (v) is not prohibited from providing or arranging to provide health care services under the medical assistance program. The criteria may include consideration of:

(1) the person's knowledge of the violation;

(2) the likelihood that education provided to the person would be sufficient to prevent future violations;

(3) the potential impact on availability of services in the community served by the person; and

(4) any other reasonable factor identified by the inspector general [department].

(x) Subsections (b)(1-b) through (1-f) do not prohibit a person from engaging in:

(1) generally accepted business practices, as determined by inspector general [department] rule, including:

(A) conducting a marketing campaign;

(B) providing token items of minimal value that advertise the person's trade name; and

(C) providing complimentary refreshments at an informational meeting promoting the person's goods or services;

(2) the provision of a value-added service if the person is a managed care organization; or

(3) other conduct specifically authorized by law, including conduct authorized by federal safe harbor regulations (42 C.F.R. Section 1001.952).

SECTION 30. Section 32.070(d), Human Resources Code, is amended to read as follows:

(d) This section does not apply to a computerized audit conducted using the Medicaid Fraud Detection Audit System or an audit or investigation of fraud and abuse conducted by the Medicaid fraud control unit of the office of the attorney general, the office of the state auditor, the office of [the] inspector general, or the Office of Inspector General in the United States Department of Health and Human Services.

SECTION 31. Section 33.015(e), Human Resources Code, is amended to read as follows:

(e) The department shall require a person exempted under this section from making a personal appearance at department offices to provide verification of the person's entitlement to the exemption on initial eligibility certification and on each subsequent periodic eligibility recertification. If the person does not provide verification and the department considers the verification necessary to protect the integrity of the food stamp program, the department shall initiate a fraud referral to the [department's] office of inspector general established under Section 531.102, Government Code.

SECTION 32. Article 2.12, Code of Criminal Procedure, is amended to read as follows:

Art. 2.12. WHO ARE PEACE OFFICERS. The following are peace officers:

(1) sheriffs, their deputies, and those reserve deputies who hold a permanent peace officer license issued under Chapter 1701, Occupations Code;

(2) constables, deputy constables, and those reserve deputy constables who hold a permanent peace officer license issued under Chapter 1701, Occupations Code;

(3) marshals or police officers of an incorporated city, town, or village, and those reserve municipal police officers who hold a permanent peace officer license issued under Chapter 1701, Occupations Code;

(4) rangers and officers commissioned by the Public Safety Commission and the Director of the Department of Public Safety;

(5) investigators of the district attorneys', criminal district attorneys', and county attorneys' offices;

(6) law enforcement agents of the Texas Alcoholic Beverage Commission;

(7) each member of an arson investigating unit commissioned by a city, a county, or the state;

(8) officers commissioned under Section 37.081, Education Code, or Subchapter E, Chapter 51, Education Code;

(9) officers commissioned by the General Services Commission;

(10) law enforcement officers commissioned by the Parks and Wildlife Commission;

(11) airport police officers commissioned by a city with a population of more than 1.18 million that operates an airport that serves commercial air carriers;

(12) airport security personnel commissioned as peace officers by the governing body of any political subdivision of this state, other than a city described by Subdivision (11), that operates an airport that serves commercial air carriers;

(13) municipal park and recreational patrolmen and security officers;

(14) security officers and investigators commissioned as peace officers by the comptroller;

(15) officers commissioned by a water control and improvement district under Section 49.216, Water Code;

(16) officers commissioned by a board of trustees under Chapter 54, Transportation Code;

(17) investigators commissioned by the Texas Medical [State] Board [of Medical Examiners];

(18) officers commissioned by the board of managers of the Dallas County Hospital District, the Tarrant County Hospital District, or the Bexar County Hospital District under Section 281.057, Health and Safety Code;

(19) county park rangers commissioned under Subchapter E, Chapter 351, Local Government Code;

(20) investigators employed by the Texas Racing Commission;

(21) officers commissioned under Chapter 554, Occupations Code;

(22) officers commissioned by the governing body of a metropolitan rapid transit authority under Section 451.108, Transportation Code, or by a regional transportation authority under Section 452.110, Transportation Code;

(23) investigators commissioned by the attorney general under Section 402.009, Government Code;

(24) security officers and investigators commissioned as peace officers under Chapter 466, Government Code;

(25) an officer employed by the [Texas] Department of State Health Services under Section 431.2471, Health and Safety Code;

(26) officers appointed by an appellate court under Subchapter F, Chapter 53, Government Code;

(27) officers commissioned by the state fire marshal under Chapter 417, Government Code;

(28) an investigator commissioned by the commissioner of insurance under Section 701.104 [Article 1.10D], Insurance Code;

(29) apprehension specialists commissioned by the Texas Youth Commission as officers under Section 61.0931, Human Resources Code;

(30) officers appointed by the executive director of the Texas Department of Criminal Justice under Section 493.019, Government Code;

(31) investigators commissioned by the Commission on Law Enforcement Officer Standards and Education under Section 1701.160, Occupations Code;

(32) commission investigators commissioned by the Texas [Commission on] Private Security Board under Section 1702.061(f), Occupations Code;

(33) the fire marshal and any officers, inspectors, or investigators commissioned by an emergency services district under Chapter 775, Health and Safety Code; [and]

(34) officers commissioned by the State Board of Dental Examiners under Section 254.013, Occupations Code, subject to the limitations imposed by that section; and

(35) officers commissioned by the office of inspector general established under Section 531.102, Government Code.

SECTION 33. (a) A rule adopted by the Health and Human Services Commission or a health and human services agency that is necessary to accomplish the functions of the office of inspector general established under Section 531.102, Government Code, as those duties have been expanded by this Act, is also a rule of the office and remains in effect as a rule of the office until modified by the inspector general.

(b) A contract or proceeding related to a function transferred to the office of inspector general under this Act is transferred to the office. The transfer does not affect the status of a proceeding or the validity of a contract.

SECTION 34. (a) All personnel and assets substantially engaged in the performance of functions transferred to the office of inspector general under this Act shall be promptly transferred along with any equipment, documents, and records currently assigned to or used by that personnel if necessary for the continuing performance of the functions. Inventory of personnel, equipment, documents, records, and assets to be transferred under this section shall be accomplished jointly by the transferring agency and the inspector general of the Health and Human Services Commission before the effective date of this Act. All funds previously appropriated or used, from any source, by the transferring agency in support of the transferred functions, personnel, equipment, documents, records, or assets shall also be contemporaneously transferred to the office.

(b) For purposes of this section, "currently assigned" means:

(1) all personnel and vacant full-time equivalent positions assigned to or supporting a transferred function at any time during the state fiscal biennium beginning September 1, 2005; and

(2) all inventory and equipment assigned to a transferred function or transferring personnel or that was in the possession of transferring personnel on or at any time after October 31, 2006.

(c) All state and federal funding, including funding for overhead costs, support costs, and lease or colocation lease costs, for the functions to be transferred to the office of inspector general created under this Act shall be reallocated to that office.

(d) For purposes of federal single state agency funding requirements, any federal funds that may not be appropriated directly to the office of inspector general shall be transferred from the single state agency receiving the funds to the office of inspector general if the funds are intended for a function performed by the office.

SECTION 35. This Act takes effect September 1, 2007.