2007S0335-2 02/16/07

By: Deuell S.B. No. 750

A BILL TO BE ENTITLED

AN ACT

relating to the creation of the Office of State Inspector General.

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

SECTION 1. Subtitle B, Title 4, Government Code, is amended by adding Chapter 422 to read as follows: CHAPTER 422. OFFICE OF STATE INSPECTOR GENERAL SUBCHAPTER A. GENERAL PROVISIONS

Sec. 422.001. DEFINITIONS. In this chapter:

(1) "Covered entity" means a person, entity, or representative that has an employment, agency, contractual, financial, or fiduciary relationship with a state agency that administers or implements state or federally funded programs, and includes a provider.

(2) "Fraud" means an intentional deception or misrepresentation made by a person with the knowledge that the deception could result in some unauthorized benefit to that person or some other person, including any act that constitutes fraud under applicable federal or state law.

(3) "Furnished" refers to items or services provided directly by, or under the direct supervision of, or ordered by a practitioner or other individual (either as an employee or in the individual's own capacity), a covered entity, or other supplier of services, excluding services ordered by one party but billed for and provided by or under the supervision of another.

(4) "Hold on payment" means the temporary denial of payment or reimbursement for items or services furnished by a covered entity and includes the temporary denial of reimbursement under a state or federal program for items or services furnished by a specified provider.

(5) "Office" means the Office of State Inspector General.

(6) "Practitioner" means a physician or other individual licensed under state law to practice the individual's profession.

(7) "Program exclusion" means the suspension of a covered entity from being authorized under a state or federal program to request payment for, or reimbursement of, items or services furnished by that specific entity.

(8) "Provider" has the meaning assigned by Section 531.1011.

(9) "State inspector general" means the individual appointed as the state inspector general under this chapter.

Sec. 422.002. OFFICE OF STATE INSPECTOR GENERAL. (a) The Office of State Inspector General is an agency of the state.

(b) The office operates under the direction and supervision of the state inspector general.

(c) The office shall have its principal office and headquarters in Austin, Texas.

Sec. 422.003. SUNSET PROVISION. The Office of State Inspector General is subject to Chapter 325 (Texas Sunset Act). Unless continued in existence as provided by that chapter, the office is abolished and this chapter expires September 1, 2019.

Sec. 422.004. REFERENCE IN OTHER STATUTES. Notwithstanding any other provision of law, a reference in law or rule to the Health and Human Services Commission's office of investigations and enforcement or the Health and Human Services Commission's office of inspector general means the Office of State Inspector General established under this chapter. [Sections 422.005-422.050 reserved for expansion] SUBCHAPTER B. ADMINISTRATIVE PROVISIONS

Sec. 422.051. APPOINTMENT BY GOVERNOR. (a) The governor, with the advice and consent of the senate, shall appoint the state inspector general.

(b) The governor shall appoint the state inspector general without regard to the race, color, disability, sex, religion, age, or national origin of the appointee.

(c) In appointing a person as state inspector general, the governor shall consider, among other things, the person's knowledge of laws, experience in the enforcement of law, honesty, integrity, education, training, and executive ability.

Sec. 422.052. ELIGIBILITY. (a) A person is not eligible for appointment as state inspector general if the person or the person's spouse is an employee, officer, or paid consultant of a trade association in a field under the office's jurisdiction.

(b) A person who is required to register as a lobbyist under Chapter 305 because of the person's activities for compensation in or on behalf of a profession related to a field under the office's jurisdiction may not serve as state inspector general.

(c) A person is not eligible for appointment as state inspector general if the person has a financial interest in a corporation, organization, or association receiving state or federal funds under contract with the state or a political subdivision of the state.

Sec. 422.053. TERM. The state inspector general serves a two-year term that expires on February 1 of each odd-numbered year.

Sec. 422.054. STATE AGENCY INSPECTORS GENERAL. (a) As necessary to implement this chapter, the state inspector general, in consultation with the office of the governor, may designate state agency inspectors general in state agencies that implement or administer state or federal programs. A state agency inspector general may be colocated with an agency.

(b) Each state agency inspector general, whether or not colocated with an agency, is an employee of the office and shall report to the state inspector general.

(c) A state agency shall provide facilities and support services, including suitable office space, furniture, computer equipment, communications equipment, and administrative support, to each state agency inspector general colocated at the agency and the state agency inspector general's staff.

(d) The office and each state agency with which a state agency inspector general is colocated shall execute a service level agreement to establish performance standards regarding the facilities and support services provided by the agency. Each service level agreement must be reviewed at least annually to ensure that the facilities and support services are being provided in accordance with the agreement.

Sec. 422.055. PEACE OFFICERS. (a) The office may employ and commission peace officers, in a number not to exceed 10 percent of the total number of employees of the office, for the purpose of assisting the state inspector general in carrying out the duties of the office under this chapter or other law.

(b) 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.

Sec. 422.056. MERIT SYSTEM. (a) The office may establish a merit system for its employees.

(b) The merit system may be maintained in conjunction with other state agencies that are required by state or federal law to operate under a merit system.

Sec. 422.057. RULEMAKING AUTHORITY. The state inspector general may adopt rules necessary to carry out the duties of the office under this chapter and other law.

Sec. 422.058. PUBLIC INPUT INFORMATION AND COMPLAINTS. (a) The office shall develop and implement policies that provide the public a reasonable opportunity to appear before the office and to speak on any issue under the office's jurisdiction.

(b) The office shall prepare information of public interest describing the functions of the office and the office's procedures by which complaints are filed with and resolved by the office. The office shall make the information available to the public and appropriate state agencies.

(c) The office shall keep an information file about each complaint filed with the office relating to a state agency, license holder, or entity receiving state or federal funds and falling within the jurisdiction of the office.

Sec. 422.059. AWARD FOR REPORTING FRAUD, WASTE, ABUSE, OR OVERCHARGES. (a) The office may grant an award to an individual who reports activity that constitutes fraud, waste, or abuse of funds in any state or federal program implemented or administered by a state agency or who reports overcharges in a program if the office determines that the disclosure results in the recovery of an administrative or civil penalty imposed by law. The office may not grant an award to an individual in connection with a report if the office or attorney general had independent knowledge of the activity reported by the individual.

(b) The office shall determine the amount of an award granted under this section. An award may not exceed five percent of the amount of the administrative or civil penalty imposed by law that resulted from the individual's disclosure. In determining the amount of an award, the office shall consider how important the disclosure is in ensuring the fiscal integrity of the program. The office may also consider whether the individual participated in the fraud, waste, abuse, or overcharge.

(c) A person who brings an action under Subchapter C, Chapter 36, Human Resources Code, is not eligible for an award under this section. [Sections 422.060-422.100 reserved for expansion] SUBCHAPTER C. POWERS AND DUTIES; ENFORCEMENT

Sec. 422.101. AUTHORITY. (a) The office is responsible for the audit, detection, investigation, prevention, and review of fraud, waste, and abuse in the provision of health and human services as provided by Section 531.102 and in the state implementation or administration of all state or federally funded programs and the enforcement of state law relating to those programs.

(b) The office may obtain any information or technology necessary to enable the office to meet its responsibilities under this chapter or other law.

(c) The state 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 this chapter.

(d) The office shall employ and train office staff to enable the staff to pursue fraud, waste, and abuse cases as necessary.

Sec. 422.102. POWERS. The office has all the powers necessary or appropriate to carry out its responsibilities and functions under this chapter and other law. In addition to performing functions and duties otherwise provided by law, the office may:

(1) assess administrative penalties authorized by law on behalf of a state agency implementing or administering a state or federal program 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, waste, 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 funds, including contract and grant funds, administered by a person or state agency;

(5) conduct reviews, investigations, and inspections relating to the funds described by Subdivision (4);

(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; and

(7) conduct internal affairs investigations in instances of fraud, waste, and abuse and in instances of misconduct by employees, contractors, subcontractors, and vendors.

Sec. 422.103. EXECUTIVE ORDERS. (a) The governor may issue executive orders directing state agencies to implement recommendations for corrective or remedial actions promoting the economical and efficient administration of funds and the detection of fraud issued by the office under Section 422.102.

(b) The governor may submit a report to the lieutenant governor, the speaker of the house of representatives, the state auditor, and the comptroller describing executive orders issued under this section and compliance by state agencies with those orders.

Sec. 422.104. CRITERIA FOR INVESTIGATIONS. The office by rule shall set specific criteria, including claims criteria, that, when met, require the office to begin an investigation.

Sec. 422.105. INTEGRITY REVIEWS. (a) If the office receives a complaint of fraud, waste, or abuse from any source, the office must conduct an integrity review to determine whether there is sufficient basis to warrant a full investigation. An integrity review must begin not later than the 30th day after the date the office receives a complaint or has reason to believe that fraud, waste, or abuse has occurred. An integrity review must be completed not later than the 90th day after it began.

(b) If the findings of an integrity review give the office reason to believe that an incident of fraud, waste, or abuse involving possible criminal conduct has occurred in the administration or implementation of a state or federally funded program, the office must take the following action after the completion of the integrity review:

(1) if a covered entity is suspected of fraud, waste, or abuse involving criminal conduct, the office must refer the case to the appropriate state or local official having jurisdiction to prosecute such criminal conduct, provided that the criminal referral does not preclude the office from continuing its investigation of the covered entity, which investigation may lead to the imposition of appropriate administrative or civil sanctions; or

(2) if there is reason to believe that a recipient has defrauded a state or federal program, the office may conduct a full investigation of the suspected fraud.

Sec. 422.106. WITHHELD, CONCEALED, OR DESTROYED RECORDS. If the office learns or has reason to suspect that a covered entity's records are being withheld, concealed, destroyed, fabricated, or in any way falsified, the office shall immediately refer the case to the appropriate state or local official having jurisdiction to prosecute such criminal conduct. However, such criminal referral does not preclude the office from continuing its investigation of the covered entity, which investigation may lead to the imposition of appropriate administrative or civil sanctions.

Sec. 422.107. HOLDS ON PAYMENT. (a) In addition to other instances authorized under state or federal law, the office shall impose, without prior notice, a hold on payment of money owed, or claimed to be owed, to a covered entity, including claims for reimbursement submitted by a provider, to compel production of records or when requested by a state or local official to which a case was referred under Section 422.106, as applicable. The office must notify the covered entity of the hold on payment not later than the fifth working day after the date the payment hold is imposed.

(b) On timely written request by a covered entity subject to a hold on payment, except as provided by Subsection (d), the office shall file a request with the State Office of Administrative Hearings for an expedited administrative hearing regarding the hold. The covered entity must request an expedited hearing under this subsection not later than the 10th day after the date the covered entity receives notice from the office under Subsection (a).

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

(d) Subsections (b) and (c) do not apply to a covered entity subject to a hold on payment imposed by the office at the request of a state or local official to which a case was referred under Section 422.106.

Sec. 422.108. GUIDELINES FOR HOLDS ON PAYMENT AND PROGRAM EXCLUSIONS. The office shall establish guidelines under which holds on payment or program exclusions:

(1) may permissively be imposed on a covered entity; or

(2) shall automatically be imposed on a covered entity.

Sec. 422.109. FINAL REPORTS. (a) The office shall prepare a final report on each audit or investigation conducted by the office under this chapter or other law. The final report must include:

(1) a summary of the activities performed by the office in conducting the audit or investigation;

(2) a statement regarding whether the audit or investigation resulted in a finding of any wrongdoing; and

(3) a description of any findings of wrongdoing.

(b) A final report on an audit or investigation is subject to required disclosure under Chapter 552. All information and materials compiled during an audit or investigation remain confidential and not subject to required disclosure in accordance with Section 422.111(f).

Sec. 422.110. FRAUD PREVENTION. (a) The office 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 case management system or the case management system of an agency.

(b) The office shall:

(1) aggressively publicize successful fraud prosecutions and fraud-prevention programs through all available means, including the use of statewide press releases; and

(2) maintain and promote a toll-free hotline for reporting suspected fraud in state or federally funded programs implemented or administered by an agency.

Sec. 422.111. ADMINISTRATIVE SUBPOENAS. (a) The office may issue an administrative subpoena in connection with an investigation conducted by the office to compel the attendance of a relevant witness or the production, for inspection or copying, of relevant evidence that is in this state.

(b) A subpoena may be served personally or by certified mail.

(c) If a person fails to comply with a subpoena, the office, acting through the attorney general, may file suit to enforce the subpoena in a district court in this state.

(d) On finding that good cause exists for issuing the subpoena, the court shall order the person to comply with the subpoena. The court may punish a person who fails to obey the court order.

(e) The reimbursement of the expenses of a witness whose attendance is compelled under this section is governed by Section 2001.103.

(f) All information and materials subpoenaed or compiled by the office in connection with an audit or investigation are confidential and not subject to disclosure under Chapter 552 and not subject to disclosure, discovery, subpoena, or other means of legal compulsion for their release to anyone other than the office or its employees or agents involved in the audit or investigation conducted by the office, except that this information may be disclosed to the office of the attorney general, the state auditor's office, and law enforcement agencies.

(g) A person who receives information under Subsection (f) may disclose the information only in accordance with that subsection and in a manner that is consistent with the authorized purpose for which the person first received the information.

Sec. 422.112. AGENCY COOPERATION. All state agencies shall provide assistance, as needed, to the office in connection with the office's duties relating to the investigation of fraud, waste, and abuse in the implementation or administration of state or federally funded programs. The office is entitled to access to any information maintained by a state agency or any covered entity, including internal records, relevant to the functions of the office.

Sec. 422.113. INTERAGENCY COORDINATION. (a) The Office of State 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 any state or federally funded program implemented or administered by a state agency.

(b) The memorandum of understanding shall require:

(1) the Office of State 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 to maximize the imposition of penalties, the recovery of money, and the successful prosecution of cases;

(2) the Office of State Inspector General to refer each case of suspected fraud, waste, or abuse to the office of the attorney general not later than the 20th business day after the date the Office of State Inspector General determines that the existence of fraud, waste, or abuse is reasonably indicated;

(3) 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 collection agency for initiation of civil litigation or other appropriate action;

(4) the Office of State 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;

(5) the Office of State Inspector General to notify each appropriate division of the office of the attorney general of each case referred by the Office of State Inspector General;

(6) 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;

(7) the office of the attorney general to notify the Office of State Inspector General of each case the attorney general declines to prosecute or prosecutes unsuccessfully;

(8) representatives of the Office of State 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

(9) the Office of State 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) An exchange of information under this section between the office of the attorney general and the Office of State Inspector General or any other state agency does not affect whether the information is subject to disclosure under Chapter 552.

(d) With respect to Medicaid fraud, in addition to the provisions required by Subsection (b), the memorandum of understanding required by this section must also ensure that no barriers to direct fraud referrals to the office of the attorney general's Medicaid fraud control unit or unreasonable impediments to communication between Medicaid agency employees and the Medicaid fraud control unit are imposed, and must include procedures to facilitate the referral of cases directly to the office of the attorney general.

Sec. 422.114. SEMIANNUAL REPORT. The Office of State Inspector General 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, and comptroller concerning the activities of those offices in detecting and preventing fraud, waste, and abuse under any state or federally funded program implemented or administered by a state agency that is reviewed by the Office of State Inspector General under this chapter. The report may be consolidated with any other report relating to the same subject matter the Office of State Inspector General or office of the attorney general is required to submit under other law.

Sec. 422.115. ASSESSMENT AND COLLECTION OF CERTAIN FEES AND COSTS. (a) The Office of State Inspector General 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 the attorney general or other state agency collects a penalty, restitution, or other reimbursement payment to the state.

(b) A district attorney, county attorney, city attorney, or private collection agency may collect and retain costs associated with a case referred to the attorney or agency in accordance with procedures adopted under Section 422.113 and 20 percent of the amount of the penalty, restitution, or other reimbursement payment collected.

Sec. 422.116. ASSISTING INVESTIGATIONS BY ATTORNEY GENERAL. (a) The Office of State Inspector General and the attorney general shall execute a memorandum of understanding under which the Office of State Inspector General 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 of State Inspector General shall assist in performing preliminary investigations and ongoing investigations for actions prosecuted by the attorney general under Subchapter C, Chapter 36, Human Resources Code.

(b) The memorandum of understanding must specify the type, scope, and format of the investigative support provided to the attorney general under this section.

(c) With respect to Medicaid fraud, the memorandum of understanding must ensure that no barriers to direct fraud referrals to the state's Medicaid fraud control unit by Medicaid agencies or unreasonable impediments to communication between Medicaid agency employees and the state's Medicaid fraud control unit will be imposed.

SECTION 2. Section 20.038, Business & Commerce Code, is amended to read as follows:

Sec. 20.038. EXEMPTION FROM SECURITY FREEZE. A security freeze does not apply to a consumer report provided to:

(1) a state or local governmental entity, including a law enforcement agency or court or private collection agency, if the entity, agency, or court is acting under a court order, warrant, subpoena, or administrative subpoena;

(2) a child support agency as defined by Section 101.004, Family Code, acting to investigate or collect child support payments or acting under Title IV-D of the Social Security Act (42 U.S.C. Section 651 et seq.);

(3) the Office of State Inspector General [Health and Human Services Commission] acting to investigate fraud, waste, or abuse in state agencies under Chapter 422, Government Code, or other law [under Section 531.102, Government Code];

(4) the comptroller acting to investigate or collect delinquent sales or franchise taxes;

(5) a tax assessor-collector acting to investigate or collect delinquent ad valorem taxes;

(6) a person for the purposes of prescreening as provided by the Fair Credit Reporting Act (15 U.S.C. Section 1681 et seq.), as amended;

(7) a person with whom the consumer has an account or contract or to whom the consumer has issued a negotiable instrument, or the person's subsidiary, affiliate, agent, assignee, prospective assignee, or private collection agency, for purposes related to that account, contract, or instrument;

(8) a subsidiary, affiliate, agent, assignee, or prospective assignee of a person to whom access has been granted under Section 20.037(b);

(9) a person who administers a credit file monitoring subscription service to which the consumer has subscribed;

(10) a person for the purpose of providing a consumer with a copy of the consumer's report on the consumer's request;

(11) a check service or fraud prevention service company that issues consumer reports:

(A) to prevent or investigate fraud; or

(B) for purposes of approving or processing negotiable instruments, electronic funds transfers, or similar methods of payment;

(12) a deposit account information service company that issues consumer reports related to account closures caused by fraud, substantial overdrafts, automated teller machine abuses, or similar negative information regarding a consumer to an inquiring financial institution for use by the financial institution only in reviewing a consumer request for a deposit account with that institution; or

(13) a consumer reporting agency that:

(A) acts only to resell credit information by assembling and merging information contained in a database of another consumer reporting agency or multiple consumer reporting agencies; and

(B) does not maintain a permanent database of credit information from which new consumer reports are produced.

SECTION 3. 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 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 Health 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 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 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 State Inspector General under Chapter 422, Government Code.

SECTION 4. Subsection (c), Section 531.008, 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 5. Section 531.1011, Government Code, is amended to read as follows:

Sec. 531.1011. DEFINITIONS. For purposes of this subchapter:

(1) "Fraud" has the meaning assigned by Section 422.001 [means an intentional deception or misrepresentation made by a person with the knowledge that the deception could result in some unauthorized benefit to that person or some other person, including any act that constitutes fraud under applicable federal or state law].

(2) "Office" means the Office of State Inspector General ["Furnished" refers to items or services provided directly by, or under the direct supervision of, or ordered by a practitioner or other individual (either as an employee or in the individual's own capacity), a provider, or other supplier of services, excluding services ordered by one party but billed for and provided by or under the supervision of another].

(3) ["Hold on payment" means the temporary denial of reimbursement under the Medicaid program for items or services furnished by a specified provider.

[(4) "Practitioner" means a physician or other individual licensed under state law to practice the individual's profession.

[(5) "Program exclusion" means the suspension of a provider from being authorized under the Medicaid program to request reimbursement of items or services furnished by that specific provider.

[(6)] "Provider" means a person, firm, partnership, corporation, agency, association, institution, or other entity that was or is approved by the commission to:

(A) provide medical assistance under contract or provider agreement with the commission; or

(B) provide third-party billing vendor services under a contract or provider agreement with the commission.

SECTION 6. Section 531.102, Government Code, is amended to read as follows:

Sec. 531.102. OFFICE OF STATE INSPECTOR GENERAL. [(a)] The office [commission, through the commission's office of inspector general,] is responsible for the investigation of 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. [The commission may obtain any information or technology necessary to enable the office to meet its responsibilities under this subchapter or other law.

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

[(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 commission shall train office staff to enable the staff to pursue priority Medicaid and other health and human services fraud and abuse cases as necessary.

[(d) The commission may require employees of health and human services agencies to provide assistance to the office in connection with the office's duties relating to the investigation of fraud 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, 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 commission receives a complaint of Medicaid fraud or abuse from any source, the office must conduct an integrity review to determine whether there is sufficient basis to warrant a full investigation. An integrity review must begin not later than the 30th day after the date the commission receives a complaint or has reason to believe that fraud 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 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 office may conduct a full investigation of the suspected fraud.

[(g)(1) Whenever the office learns or has reason to suspect that a provider's records 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 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 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 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 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 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 may:

[(1) assess administrative penalties otherwise authorized by law on behalf of the commission or a health and human services agency;

[(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 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 and abuse in administration of those funds.

[(i) Notwithstanding any other provision of law, a reference in law or rule to the commission's office of investigations and enforcement means the office of inspector general established under this section.

[(j) The office shall prepare a final report on each audit or investigation conducted under this section. The final report must include:

[(1) a summary of the activities performed by the office in conducting the audit or investigation;

[(2) a statement regarding whether the audit or investigation resulted in a finding of any wrongdoing; and

[(3)a description of any findings of wrongdoing.

[(k) A final report on an audit or investigation is subject to required disclosure under Chapter 552. All information and materials compiled during the audit or investigation remain confidential and not subject to required disclosure in accordance with Section 531.1021(g).]

SECTION 7. Section 531.105, Government Code, is amended to read as follows:

Sec. 531.105. FRAUD DETECTION TRAINING. (a) The office [commission] shall develop and implement a program to provide annual training to contractors who process Medicaid claims and appropriate staff of the commission and other health and human services agencies [the 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 other health and human services agencies [The Texas Department of Health and the Texas Department of Human Services], in cooperation with the office [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 422.114 [531.103(c)].

SECTION 8. Subsections (a), (b), and (d) through (g), Section 531.106, Government Code, are amended to read as follows:

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

(b) The office [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 Office of State Inspector General [commission] offices.

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

(f) The office [commission] shall investigate [refer] cases identified by the technology and shall refer cases to the [commission's office of investigations and enforcement or the] office of the attorney general for prosecution, 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 office [commission] 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 office [commission] shall investigate [refer] the case [for investigation to the commission's office of investigations and enforcement].

SECTION 9. Section 531.1061, Government Code, is amended to read as follows:

Sec. 531.1061. FRAUD INVESTIGATION TRACKING SYSTEM. (a) The office [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 [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 10. Subsection (a), Section 531.1062, Government Code, is amended to read as follows:

(a) The office [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 11. Subsections (a), (b), and (f), Section 531.107, 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 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 State Inspector General, appointed by the state inspector general [commission, appointed by the 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 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 12. Section 531.108, Government Code, is amended to read as follows:

Sec. 531.108. FRAUD PREVENTION. (a) [The commission's office of 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 commission's case management system or the case management system of a health and human services agency.

[(b)The 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 commission or a health and human services agency is maintained and promoted, either by the commission or by a health and human services agency.

[(c)] The office [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.

(b) [(d)] The office [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.

(c) [(e)] The office [commission] shall submit to the governor and Legislative Budget Board a semiannual report on the results of computerized matching of office [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.

SECTION 13. Section 531.109, Government Code, is amended to read as follows:

Sec. 531.109. SELECTION AND REVIEW OF CLAIMS. (a) The office [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 [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 [commission] shall determine the types of claims at which office [commission] resources for fraud, waste, and abuse detection should be primarily directed.

SECTION 14. Subsections (a) and (c) through (f), Section 531.110, Government Code, are amended to read as follows:

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

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

(e) The office [commission, or a health and human services agency designated by the 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 and other health and human services agencies [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 [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 [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 and other health and human services agencies [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 office [commissioner] shall adopt rules as necessary to accomplish the purposes of this section.

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

(b) If after an investigation the office [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 office [commission] shall adopt rules as necessary to implement this section.

SECTION 18. Subsection (a), Section 533.005, 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 Office [commission's office] of State Inspector General [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 19. Subsections (a), (b), (c), and (e), Section 533.012, Government Code, are amended to read as follows:

(a) Each managed care organization contracting with the commission under this chapter shall submit to the Office of State Inspector General [commission]:

(1) a description of any financial or other business relationship between the organization and any subcontractor providing health care services under the contract;

(2) a copy of each type of contract between the organization and a subcontractor relating to the delivery of or payment for health care services;

(3) a description of the fraud control program used by any subcontractor that delivers health care services; and

(4) a description and breakdown of all funds paid to the managed care organization, including a health maintenance organization, primary care case management, and an exclusive provider organization, necessary for the office [commission] to determine the actual cost of administering the managed care plan.

(b) The information submitted under this section must be submitted in the form required by the Office of State Inspector General [commission] and be updated as required by the office [commission].

(c) The Office [commission's office] of State 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.

(e) Information submitted to the Office of State Inspector General [commission] under Subsection (a)(1) is confidential and not subject to disclosure under Chapter 552[, Government Code].

SECTION 20. Subsection (b), Section 2054.376, 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 Office of State Inspector General's use, for criminal justice and statutorily mandated confidentiality purposes, of a federal or state database or network.

SECTION 21. Subsection (b), Section 21.014, Human Resources Code, is amended to read as follows:

(b) The state [person employed by the department as] inspector general shall make reports to and consult with the chairman of the board regarding:

(1) the selection of internal audit topics;

(2) the establishment of internal audit priorities; and

(3) the findings of each regular or special internal audit initiative.

SECTION 22. Section 32.003, Human Resources Code, is amended by adding Subdivision (3-a) to read as follows:

(3-a) "Inspector general's office" means the Office of State Inspector General.

SECTION 23. Section 32.0291, Human Resources Code, is amended to read as follows:

Sec. 32.0291. PREPAYMENT REVIEWS AND POST PAYMENT HOLDS. (a) Notwithstanding any other law, the inspector general's office [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 inspector general's office [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 inspector general's office [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 [department] under Subsection (b). The office [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 [department] in imposing the hold is relevant, credible, and material to the issue of fraud, waste, abuse, or wilful misrepresentation.

(d) The inspector general's office [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 [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 24. Section 32.032, Human Resources Code, is amended to read as follows:

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

SECTION 25. Subsections (a) through (d), Section 32.0321, Human Resources Code, are amended to read as follows:

(a) The inspector general's office [department] by rule may require each provider of medical assistance in a provider type that has demonstrated significant potential for fraud or abuse to file with the office [department] a surety bond in a reasonable amount. The office [department] by rule shall require a provider of medical assistance to file with the office [department] a surety bond in a reasonable amount if the office [department] identifies a pattern of suspected fraud 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 or abuse.

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

(c) Subject to Subsection (d) or (e), the inspector general's office [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 office [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 inspector general's office [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 26. Section 32.0322, Human Resources Code, is amended to read as follows:

Sec. 32.0322. CRIMINAL HISTORY RECORD INFORMATION. (a) The inspector general's office 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 inspector general's office [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 27. Subsection (d), Section 32.070, 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 inspector general's office [of the inspector general], or the Office of Inspector General in the United States Department of Health and Human Services.

SECTION 28. Subsection (e), Section 33.015, 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 Office [department's office] of State Inspector General [inspector general].

SECTION 29. The following sections of the Government Code are repealed:

(1) Section 531.101;

(2) Section 531.1021;

(3) Section 531.103; and

(4) Section 531.104.

SECTION 30. (a) The Office of State Inspector General under Chapter 422, Government Code, as added by this Act, is created on the effective date of this Act.

(b) On January 1, 2008, the office of inspector general of the Health and Human Services Commission created under Section 531.102, Government Code, as that section existed before amendment by this Act, is abolished.

(c) Not later than January 1, 2008:

(1) all powers, duties, obligations, rights, contracts, records, personal property, unspent appropriations, state and federal funds, including overhead costs, support costs, and lease or colocation costs, of the office of inspector general of the Health and Human Services Commission shall be transferred, as consistent with this Act, to the Office of State Inspector General;

(2) all personnel, vacant full-time equivalent positions, and assets assigned, as of the effective date of this Act, to the office of inspector general of the Health and Human Services Commission or engaged in the performance of the functions of that office shall be transferred, as consistent with this Act, to the Office of State Inspector General;

(3) each state agency for which a state agency inspector general is designated by the state inspector general on or before October 1, 2007, shall transfer to the Office of State Inspector General, as consistent with this Act, all personnel, vacant full-time equivalent positions, and assets engaged in the performance of or the support of agency functions relating to the detection, investigation, and prevention of fraud, waste, and abuse in the implementation or administration of state or federally funded programs;

(4) 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 State Inspector General shall be reallocated to that office; and

(5) for purposes of federal single state agency funding requirements, any federal funds that may not be appropriated directly to the Office of State Inspector General shall be transferred from the single state agency receiving the funds to the Office of State Inspector General if the funds are intended for a function performed by that office.

(d) All future federal funding to be allocated to the office of inspector general of the Health and Human Services Commission, including drawing funds and transferring funds, shall be renegotiated by the state inspector general for reallocation to the Office of State Inspector General.

(e) A state agency for which a state agency inspector general is designated by the state inspector general after October 1, 2007, shall within 90 days after the designation transfer to the Office of State Inspector General, as consistent with this Act, all personnel, vacant full-time equivalent positions, and assets engaged in the performance of or the support of agency functions relating to the detection, investigation, and prevention of fraud, waste, and abuse in the implementation or administration of state or federally funded programs.

SECTION 31. (a) The Health and Human Services Commission shall take all action necessary to provide for the orderly transfer of the assets and responsibilities of the commission's office of inspector general to the Office of State Inspector General. In the event a transfer is not completed by the date required under this Act, all possible efforts shall be made to promptly conclude the transfer.

(b) A rule or form adopted by the office of inspector general of the Health and Human Services Commission is a rule or form of the Office of State Inspector General and remains in effect until changed by the Office of State Inspector General.

(c) A reference in law or administrative rule to the office of inspector general of the Health and Human Services Commission means the Office of State Inspector General.

SECTION 32. (a) The amendment by this Act of Section 531.102, Government Code, does not affect the entitlement of the person appointed as inspector general under Subsection (a-1) of that section to serve out the remainder of the person's term and carry out the functions of state inspector general in the same manner as a state inspector general appointed under Chapter 422, Government Code, as added by this Act, for the remainder of the person's term.

(b) This section does not prohibit a person described by Subsection (a) of this section from being appointed under Chapter 422, Government Code, as added by this Act, if the person has the qualifications required under that chapter.

(c) As soon as possible after the term of the inspector general under Section 531.102, Government Code, expires or after the office of inspector general otherwise becomes vacant at an earlier date, the governor shall appoint a state inspector general under Chapter 422, Government Code, as added by this Act, to an initial term expiring February 1, 2009.

SECTION 33. (a) The amendment by this Act of Section 531.102, Government Code, does not affect the validity of a complaint, investigation, or other proceeding initiated under that section before the effective date of this Act. A complaint, investigation, or other proceeding initiated under that section is transferred without change to the Office of State Inspector General created under Chapter 422, Government Code, as added by this Act.

(b) The repeal by this Act of Section 531.1021, Government Code, does not affect the validity of a subpoena issued under that section before the effective date of this Act. A subpoena issued under that section before the effective date of this Act is governed by the law that existed when the subpoena was issued, and the former law is continued in effect for that purpose.

(c) The abolition by this Act of the office of inspector general of the Health and Human Services Commission created under Section 531.102, Government Code, as that section existed before amendment by this Act, does not affect the validity of an action taken by that office before it is abolished.

SECTION 34. If before implementing any provision of this Act a state agency determines that a waiver or authorization from a federal agency is necessary for implementation of that provision, the agency affected by the provision shall request the waiver or authorization and may delay implementing that provision until the waiver or authorization is granted.

SECTION 35. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2007.