BILL ANALYSIS

 

 

Senate Research Center

S.B. 207

84R5757 EES-D

By: Hinojosa et al.

 

Health & Human Services

 

3/20/2015

 

As Filed

 

 

 

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

 

The Health and Human Services Commission (HHSC) Office of Inspector General (OIG) prevents, detects, and investigates fraud, waste, and abuse and other allegations of wrongdoing in the health and human services system. In fiscal year 2014, OIG had 774 staff and operated on a budget of $48.9 million, a growth of nearly 30 percent since 2011.

 

In its first review of OIG, conducted as part of the HHSC review, the Sunset Advisory Commission (Sunset) found deep management and due process concerns, particularly in OIG’s efforts to detect and deter Medicaid fraud, waste, and abuse.  OIG’s investigative processes lack structure, guidelines, and performance measures to ensure consistent and fair results.  Poor communication and a lack of transparency give a perception that OIG makes up rules as it goes.  These significant concerns and vague accountability between the governor and the executive commissioner of HHSC (executive commissioner) demand serious attention to set this office right so it can appropriately ensure the integrity of programs in the health and human services system.

 

Major Provisions in Sunset Legislation:

 

Strengthens the accountability of OIG.

 

 

Improves the effectiveness of OIG through a series of process improvements to measure and achieve better results.

 

 

Streamlines the credible allegation of fraud (CAF) payment hold appeal process.

 

 

As proposed, S.B. 207 amends current law relating to the authority and duties of the office of inspector general of the Health and Human Services Commission.

 

RULEMAKING AUTHORITY

 

Rulemaking authority previously granted to the State Office of Administrative Hearings is rescinded in SECTION 2 (Section 531.102, Government Code) and SECTION 9 (Section 531.1201, Government Code) of this bill.

 

Rulemaking authority previously granted to the executive commissioner of the Health and Human Services Commission (executive commissioner) is rescinded in SECTION 2 (Section 531.102, Government Code) and SECTION 9 (Section 531.1201, Government Code) of this bill.

 

Rulemaking authority previously granted to the executive commissioner is modified in SECTION 2 (Section 531.102, Government Code) and SECTION 4 (Section 531.113, Government Code) of this bill.

 

Rulemaking authority is expressly granted to the executive commissioner in SECTION 2 (Section 531.102, Government Code), SECTION 13, and SECTION 15 of this bill.

 

SECTION BY SECTION ANALYSIS

 

SECTION 1. Amends Section 531.1011(4), Government Code, to redefine “fraud.”

 

SECTION 2.  Amends Section 531.102, Government Code, by amending Subsections (a-1), (f), (g), and (k) and adding Subsections (f-1), (p), (q), and (r), as follows:

 

(a-1) Requires the executive commissioner of the Health and Human Services Commission (executive commissioner), rather than the governor, to appoint an inspector general to serve as director of the office of the inspector general of the Health and Human Services Commission (OIG).  Provides that the inspector general serves a one-year term that expires on February 1.

 

(f) (1) Requires OIG, if the Health and Human Services Commission (HHSC) receives a complaint or allegation of Medicaid fraud or abuse from any source, to conduct a preliminary investigation as provided by Section 531.118(c) (requiring OIG to review allegations of fraud or abuse and prepare a preliminary investigation report) to determine whether there is a sufficient basis to warrant a full investigation.  Requires that a preliminary investigation begin not later than the 30th day and be completed not later than the 45th day after the date HHSC receives a complaint or allegation or has reason to believe that fraud or abuse has occurred. Deletes existing text requiring that a preliminary investigation be completed not later than the 90th day after it began.

 

(2) Makes no change to this subdivision.

 

(f-1) Requires OIG to complete a full investigation of a complaint or allegation of Medicaid fraud or abuse against a provider not later than the 180th day after the date the full investigation begins unless OIG determines that more time is needed to complete the investigation.  Requires OIG, except as otherwise provided by this subsection, if OIG determines that more time is needed to complete the investigation, to provide notice to the provider who is the subject of the investigation stating that the length of the investigation will exceed 180 days and specifying the reasons why OIG was unable to complete the investigation within the 180-day period.  Provides that OIG is not required to provide notice to the provider under this subsection if OIG determines that providing notice would jeopardize the investigation.

 

(g)(1) Makes no change to this subdivision.

 

(2) Requires OIG, as authorized under state and federal law, rather than in addition to other instances authorized under state or federal law, and except as provided by Subdivisions (8) and (9), to impose without prior notice a payment hold on claims for reimbursement submitted by a provider only to compel production of records, when requested by the state's Medicaid fraud control unit, or on the determination that a credible allegation of fraud exists, subject to Subsections (l) (requiring OIG to employ a medical director) and (m) (requiring OIG to employ a dental director), as applicable. Provides that the payment hold is a serious enforcement tool that OIG imposes to mitigate ongoing financial risk to the state and that a payment hold imposed under this subdivision takes immediate effect.  Requires OIG to notify the provider of the payment hold in accordance with 42 C.F.R. Section 455.23(b) and, except as provided by that regulation, not later than the fifth day after the date OIG imposes the payment hold. Requires that the notice of payment hold provided under this subdivision, in addition to the requirements of 42 C.F.R. Section 455.23(b), also include:

 

(A) the specific basis for the hold, including identification of the claims supporting the allegation at that point in the investigation, a representative sample of any documents that form the basis for the hold, and a detailed summary of OIG’s evidence relating to the allegation;

 

(B) a description of administrative and judicial due process rights and remedies, including the provider's option to seek informal resolution, the provider's right to seek a formal administrative appeal hearing, or that the provider may seek both, rather than a description of administrative and judicial due process remedies, including the provider’s right to seek informal resolution, a formal administrative appeal hearing, or both; and

 

(C)  a detailed timeline for the provider to pursue the rights and remedies described in Paragraph (B).

 

(3) Requires OIG, on timely written request by a provider subject to a payment hold under Subdivision (2), other than a hold requested by the state's Medicaid fraud control unit, to file a request with the State Office of Administrative Hearings (SOAH) for an expedited administrative hearing regarding the hold not later than the third day after the date OIG receives the provider's request. Requires the provider to request an expedited administrative hearing under this subdivision not later than the 10th, rather than the 30th, day after the date the provider receives notice from OIG under Subdivision (2). Requires SOAH to hold the expedited administrative hearing not later than the 45th day after the date SOAH receives the request for the hearing.  Provides that, in a hearing held under this subdivision:

 

(A)  the provider and OIG are each limited to four hours of testimony, excluding time for responding to questions from the administrative law judge;

 

(B)  the provider and OIG are each entitled to two continuances under reasonable circumstances; and

 

(C)  OIG is required to show probable cause that the credible allegation of fraud that is the basis of the payment hold has an indicia of reliability and that continuing to pay the provider presents an ongoing significant financial risk to the state and a threat to the integrity of the Medicaid program.

 

Deletes existing text requiring the state and the provider, unless otherwise determined by the administrative law judge for good cause at an expedited administrative hearing, to each be responsible for certain costs as set forth relating to the hearing.

 

Makes nonsubstantive changes.

 

(4) Provides that OIG is responsible for the costs of a hearing held under Subdivision (3), but a provider is responsible for the provider's own costs incurred in preparing for the hearing, rather than requires the executive commissioner and SOAH to jointly adopt rules that require a provider, before an expedited administrative hearing, to advance security for the costs for which the provider is responsible under that subdivision.

 

(5) Requires the administrative law judge, in a hearing held under Subdivision (3), to decide if the payment hold should continue but prohibits the administrative law judge from adjusting the amount or percent of the payment hold. Provides that the decision of the administrative law judge is final and may not be appealed, rather than authorizes a provider subject to a payment hold, other than a hold requested by the state's Medicaid fraud control unit, to appeal a final administrative order by filing a petition for judicial review in a district court in Travis County following an expedited administrative hearing under Subdivision (3).

 

(6) Requires a provider to request an initial informal resolution meeting under this subdivision not later than the deadline prescribed by Subdivision (3) for requesting an expedited administrative hearing. Requires OIG, on receipt of a timely request, to decide whether to grant the provider’s request for an initial informal resolution meeting, and if OIG decides to grant the request, to schedule the initial information resolution meeting. Requires OIG, on receipt of a timely request, to decide whether to grant the provider's request for a second informal resolution meeting, and if OIG decides to grant the request, to schedule the second informal resolution meeting. Requires that the informal resolution process run concurrently with the administrative hearing process and requires that the informal resolution process be discontinued once SOAH issues a final determination on the payment hold.

 

Deletes existing text requiring OIG, on receipt of a timely request, to schedule an initial formal resolution meeting not later than the 60th day after the date OIG receives the request, but requiring OIG to schedule the meeting on a later date, as determined by OIG, if requested by the provider.

 

Deletes existing text requiring OIG to give notice to the provider of the time and place of the initial informal resolution meeting not later than the 30th day before the date the meeting is to be held and authorizing a provider to request a second informal resolution meeting not later than the 20th day after the date of the initial informal resolution meeting.

 

Deletes existing text requiring OIG, on receipt of a timely request, to schedule a second informal resolution meeting not later than the 45th day after the date OIG receives the request, but requiring OIG to schedule the meeting on a later date, as determined by OIG, if requested by the provider. 

 

Deletes existing text requiring OIG to give notice to the provider of the time and place of the second informal resolution meeting not later than the 20th day before the date the meeting is to be held and requiring that a hearing initiated under Subdivision (3) be stayed until the informal resolution process is completed.

 

(7) Makes no change to this subdivision.

 

(8) Authorizes OIG, in accordance with 42 C.F.R. Sections 455.23(e) and (f), on the determination that a credible allegation of fraud exists, to find that good cause exists to not impose a payment hold, to not continue a payment hold, to impose a payment hold only in part, or to convert a payment hold imposed in whole to one imposed only in part, if any of the following are applicable:

 

(A)  law enforcement officials have specifically requested that a payment hold not be imposed because a payment hold would compromise or jeopardize an investigation;

 

(B)  available remedies implemented by the state other than a payment hold would more effectively or quickly protect Medicaid funds;

 

(C)  OIG determines, based on the submission of written evidence by the provider who is the subject of the payment hold, that the payment hold should be removed;

 

(D)  Medicaid recipients' access to items or services would be jeopardized by a full or partial payment hold because the provider who is the subject of the payment hold is the sole community physician or the sole source of essential specialized services in a community or serves a large number of Medicaid recipients within a designated medically underserved area;

 

(E)  the attorney general declines to certify that a matter continues to be under investigation; or

 

(F)  OIG determines that a full or partial payment hold is not in the best interests of the Medicaid program.

 

(9)  Prohibits OIG from imposing a payment hold on claims for reimbursement submitted by a provider for medically necessary services for which the provider has obtained prior authorization from HHSC or a contractor of HHSC unless OIG has evidence that the provider has materially misrepresented documentation relating to those services.

 

(k) Authorizes a confidential draft report on an audit or investigation that concerns the death of a child to be shared with the Department of Family and Protective Services (DFPS).  Provides that a draft report that is shared with DFPS remains confidential and is not subject to disclosure under Chapter 552 (Public Information).

 

(p) Requires the executive commissioner, on behalf of OIG, to adopt rules establishing criteria:

 

(1)  for opening a case;

 

(2)  for prioritizing cases for the efficient management of OIG’s workload, including rules that direct OIG to prioritize:

 

(A)  provider cases according to the highest potential for recovery or risk to the state as indicated through the provider's volume of billings, the provider's history of noncompliance with the law, and identified fraud trends;

 

(B)  recipient cases according to the highest potential for recovery and federal timeliness requirements; and

 

(C)  internal affairs investigations according to the seriousness of the threat to recipient safety and the risk to program integrity in terms of the amount or scope of fraud, waste, and abuse posed by the allegation that is the subject of the  investigation; and 

 

(3)  to guide field investigators in closing a case that is not worth pursuing through a full investigation.

 

(g) Requires the executive commissioner, on behalf of OIG, to adopt rules establishing criteria for determining enforcement and punitive actions with regard to a provider who has violated state law, program rules, or the provider's Medicaid provider agreement that include certain criteria as set forth relating to direction for categorizing provider violations according to the nature of the violation and for scaling resulting enforcement actions and a specific list of potential penalties for fraud and other Medicaid program violations.

 

(r) Requires OIG to review OIG’s investigative process, including OIG’s use of sampling and extrapolation to audit provider records. Requires that the review be performed by staff who are not directly involved in investigations conducted by OIG.

 

Makes nonsubstantive changes.

 

SECTION 3.  Redesignates Section 531.102(l), Government Code, as added by Chapter 1311 (S.B. 8), Acts of the 83rd Legislature, Regular Session, 2013, as Section 531.102(o), Government Code, and makes no further change.

 

SECTION 4.  Amends Section 531.113, Government Code, by adding Subsection (d-1) and amending Subsection (e), as follows:

 

(d-1)  Requires OIG to:

 

(1)  investigate, including by means of regular audits, possible fraud, waste, and abuse by managed care organizations subject to this section;

 

(2)  establish requirements for the provision of training to and regular oversight of special investigative units established by managed care organizations under Subsection (a)(1) (requiring each managed care organization to establish and maintain a special investigative unit) and entities with which managed care organizations contract under Subsection (a)(2) (requiring each managed care organization to contract with another entity for the investigation of fraudulent claims);

 

(3)  establish requirements for approving plans to prevent and reduce fraud and abuse adopted by managed care organizations under Subsection (b) (requiring each managed care organization to adopt a plan to prevent and reduce fraud and abuse);

 

(4)  evaluate statewide fraud, waste, and abuse trends in the Medicaid program and communicate those trends to special investigative units and contracted entities to determine the prevalence of those trends; and

 

(5)  assist managed care organizations in discovering or investigating fraud, waste, and abuse, as needed.

 

(e)  Requires the executive commissioner to adopt rules as necessary to accomplish the purposes of this section, including rules defining the investigative role of OIG with respect to the investigative role of special investigative units established by managed care organizations under Subsection (a)(1) and entities with which managed care organizations contract under Subsection (a)(2).  Requires that the rules adopted under this section specify OIG’s role in reviewing the findings of special investigative units and contracted entities, investigating cases where the overpayment amount sought to be recovered exceeds $100,000, and investigating providers who are enrolled in more than one managed care organization.

 

SECTION 5.  Amends Section 531.118(b), Government Code, as follows:

 

(b) Requires OIG, if HHSC receives an allegation of fraud or abuse against a provider from any source, to conduct a preliminary investigation of the allegation to determine whether there is a sufficient basis to warrant a full investigation. Requires that a preliminary investigation begin not later than the 30th day, and be completed not later than the 45th day, after the date HHSC receives or identifies an allegation of fraud or abuse.

 

SECTION 6.  Amends Section 531.120(b), Government Code, as follows:

 

(b) Authorizes a provider to request an initial informal resolution meeting under this section and requires OIG to schedule the informal resolution meeting on receipt of the request and to give notice to the provider of the time and place of the meeting. Requires that the informal resolution process run concurrently with the administrative hearing process, and prohibits the administrative hearing process from being delayed on account of the informal resolution process.

 

Deletes existing text requiring a provider to request an initial informal resolution meeting under this section not later than the 30th day after the date the provider receives notice under Subsection (a) (requiring HHSC or OIG to provide a provider with written notice of any proposed recoupment) and requiring OIG to, on receipt of a timely request, schedule an initial informal resolution meeting not later than the 60th day after the date OIG receives the request, but requiring OIG to schedule the meeting on a later date, as determined by OIG if requested by the provider.

 

Deletes existing text requiring OIG, on receipt of a timely request, to give notice to the provider of the time and place of the initial informal resolution meeting not later than the 30th day before the date the meeting is to be held and authorizing a provider to request a second informal resolution meeting not later than the 20th day after the date of the initial informal resolution meeting.

 

Deletes existing text requiring OIG to schedule a second informal resolution meeting not later than the 45th day after the date OIG receives the request, but requiring OIG to schedule the meeting on a later date, as determined by OIG if requested by the provider. 

 

Deletes existing text requiring OIG to give notice to the provider of the time and place of the second informal resolution meeting not later than the 20th day before the date the meeting is to be held and requiring that a provider have an opportunity to provide additional information before the second informal resolution meeting for consideration by OIG.

 

Makes nonsubstantive changes.

 

SECTION 7.  Amends Section 531.1201(b), Government Code, as follows:

 

(b)  Provides that OIG is responsible for the costs of an administrative hearing held under Subsection (a) (relating to a provider’s request for an appeal and OIG’s subsequent required duties), but provides that a provider is responsible for the provider's own costs incurred in preparing for the hearing.

 

Deletes existing text requiring the state and the provider, unless otherwise determined by the administrative law judge for good cause, at any administrative hearing under this section before SOAH, to each be responsible for certain costs as set forth relating to the hearing.

 

SECTION 8.  Amends Subchapter C, Chapter 531, Government Code, by adding Section 531.1203, as follows:

 

Sec. 531.1203.  RIGHTS OF AND PROVISION OF INFORMATION TO PHARMACIES SUBJECT TO CERTAIN AUDITS.  (a)  Provides that a pharmacy has a right to request an informal hearing before HHSC’s appeals division to contest the findings of an audit conducted by OIG or an entity that contracts with the federal government to audit Medicaid providers if the findings of the audit do not include that the pharmacy engaged in Medicaid fraud.

 

(b)  Provides that, in an informal hearing held under this section, staff of HHSC’s appeals division, assisted by staff responsible for HHSC’s vendor drug program who have expertise in the law governing pharmacies' participation in the Medicaid program, make the final decision on whether the findings of an audit are accurate. Prohibits staff of OIG from serving on the panel that makes the decision on the accuracy of an audit.

 

(c)  Requires OIG, in order to increase transparency, if OIG has access to the information, to provide to pharmacies that are subject to audit by OIG or an entity that contracts with the federal government to audit Medicaid providers detailed information relating to the extrapolation methodology used as part of the audit and the methods used to determine whether the pharmacy has been overpaid under the Medicaid program.

 

SECTION 9.  Repealer: (1)  Section 531.1201(c) (requiring the executive commissioner and SOAH to jointly adopt rules that require a provider to advance security for certain costs), Government Code; and

 

(2)  Section 32.0422(k) (prohibiting HHSC from requiring or permitting an individual who is enrolled in a group health benefit plan to participate in the Medicaid managed care program), Human Resources Code.

 

SECTION 10. Requires the Sunset Advisory Commission (Sunset), notwithstanding Section 531.004 (Sunset Provision), Government Code, to conduct a special-purpose review of the overall performance of OIG. Requires Sunset, in conducting the review, to particularly focus on OIG’s investigations and the effectiveness and efficiency of OIG’s processes, as part of Sunset’s review of agencies for the 87th Legislature.  Provides that OIG is not abolished solely because OIG is not explicitly continued following the review.

 

SECTION 11. Provides that the change in law made by this Act to Section 531. 102(a-1), Government Code, does not affect the entitlement of the person serving as inspector general for HHSC immediately before the effective date of this Act to continue to serve as inspector general for the remainder of the person’s term, unless otherwise removed. Provides that the change in law applies only to a person appointed as inspector general on or after the effective date of this act.

 

SECTION 12. Makes application of Section 531.102, Government Code, as amended by this Act, prospective.

 

SECTION 13.  Requires the executive commissioner, not later than March 1, 2016, to adopt rules necessary to implement the changes in law made by this Act to Section 531.102(g)(2), Government Code, regarding the circumstances in which a payment hold is authorized to be placed on claims for reimbursement submitted by a Medicaid provider.

 

SECTION 14.  Makes application of Sections 531.120 and 531.1201, Government Code, as amended by this Act, prospective.

 

SECTION 15.  Requires the executive commissioner, not later than March 1, 2016, to adopt rules necessary to implement Section 531.1203, Government Code, as added by this Act.

 

SECTION 16. Requires a state agency, if necessary for implementation of a provision of this Act, to request a waiver or authorization from a federal agency, and authorizes a delay of implementation until such a waiver or authorization is granted.

 

SECTION 17. Effective date: September 1, 2015.