By: Hinojosa, et al. S.B. No. 207
(In the Senate - Filed March 13, 2015; March 16, 2015, read
first time and referred to Committee on Health and Human Services;
April 7, 2015, reported adversely, with favorable Committee
Substitute by the following vote: Yeas 9, Nays 0; April 7, 2015,
sent to printer.)
Click here to see the committee vote
COMMITTEE SUBSTITUTE FOR S.B. No. 207 By: Schwertner
A BILL TO BE ENTITLED
AN ACT
relating to the authority and duties of the office of inspector
general of the Health and Human Services Commission.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 531.1011(4), Government Code, is amended
to read as follows:
(4) "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]. The term does not include
unintentional technical, clerical, or administrative errors.
SECTION 2. Section 531.102, Government Code, is amended by
amending Subsections (a-1), (g), and (k), amending Subsection (f)
as amended by S.B. 219, Acts of the 84th Legislature, Regular
Session, 2015, and adding Subsections (f-1), (p), (q), and (r) to
read as follows:
(a-1) The executive commissioner [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.
(f)(1) If the commission receives a complaint or allegation
of Medicaid fraud or abuse from any source, the office must conduct
a preliminary investigation as provided by Section 531.118(c) to
determine whether there is a sufficient basis to warrant a full
investigation. A preliminary investigation must begin not later
than the 30th day, and be completed not later than the 45th day,
after the date the commission receives a complaint or allegation or
has reason to believe that fraud or abuse has occurred. [A
preliminary investigation shall be completed not later than the
90th day after it began.]
(2) If the findings of a preliminary investigation
give the office reason to believe that an incident of fraud or abuse
involving possible criminal conduct has occurred in Medicaid, the
office must take the following action, as appropriate, not later
than the 30th day after the completion of the preliminary
investigation:
(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 Medicaid, the office may conduct a full
investigation of the suspected fraud, subject to Section
531.118(c).
(f-1) The office shall 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 the office determines that more time is
needed to complete the investigation. Except as otherwise provided
by this subsection, if the office determines that more time is
needed to complete the investigation, the office shall 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 the office was unable to complete the
investigation within the 180-day period. The office is not
required to provide notice to the provider under this subsection if
the office determines that providing notice would jeopardize the
investigation.
(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) As [In addition to other instances] authorized
under state and [or] federal law, and except as provided by
Subdivisions (8) and (9), the office shall 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) and (m), as applicable. The payment hold is a serious
enforcement tool that the office imposes to mitigate ongoing
financial risk to the state. A payment hold imposed under this
subdivision takes effect immediately. The office must 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 the office imposes the payment
hold. In addition to the requirements of 42 C.F.R. Section
455.23(b), the notice of payment hold provided under this
subdivision must also include:
(A) the specific basis for the hold, including
identification of the claims supporting the allegation at that
point in the investigation, [and] a representative sample of any
documents that form the basis for the hold, and a detailed summary
of the office's evidence relating to the allegation; [and]
(B) a description of administrative and judicial
due process rights and remedies, including the provider's option
[right] to seek informal resolution, the provider's right to seek a
formal administrative appeal hearing, or that the provider may seek
both; and
(C) a detailed timeline for the provider to
pursue the rights and remedies described in Paragraph (B).
(3) 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, the office shall file a
request with the State Office of Administrative Hearings for an
expedited administrative hearing regarding the hold not later than
the third day after the date the office receives the provider's
request. The provider must request an expedited administrative
hearing under this subdivision not later than the 10th [30th] day
after the date the provider receives notice from the office under
Subdivision (2). The State Office of Administrative Hearings
shall hold the expedited administrative hearing not later than the
45th day after the date the State Office of Administrative Hearings
receives the request for the hearing. In a hearing held under this
subdivision [Unless otherwise determined by the administrative law
judge for good cause at an expedited administrative hearing, the
state and the provider shall each be responsible for]:
(A) the provider and the office are each limited
to four hours of testimony, excluding time for responding to
questions from the administrative law judge [one-half of the costs
charged by the State Office of Administrative Hearings];
(B) the provider and the office are each entitled
to two continuances under reasonable circumstances [one-half of the
costs for transcribing the hearing]; and
(C) the office 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 Medicaid [the party's own
costs related to the hearing, including the costs associated with
preparation for the hearing, discovery, depositions, and
subpoenas, service of process and witness expenses, travel
expenses, and investigation expenses; and
[(D) all other costs associated with the hearing
that are incurred by the party, including attorney's fees].
(4) The office 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
[executive commissioner and the State Office of Administrative
Hearings shall 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) In a hearing held under Subdivision (3), the
administrative law judge shall decide if the payment hold should
continue but may not adjust the amount or percent of the payment
hold. The decision of the administrative law judge is final and may
not be appealed [Following an expedited administrative hearing
under Subdivision (3), a provider subject to a payment hold, other
than a hold requested by the state's Medicaid fraud control unit,
may appeal a final administrative order by filing a petition for
judicial review in a district court in Travis County].
(6) The executive commissioner shall adopt rules that
allow a provider subject to a payment hold 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 request an initial informal resolution meeting under this
subdivision not later than the deadline prescribed by Subdivision
(3) for requesting an expedited administrative hearing. On
receipt of a timely request, the office shall decide whether to
grant the provider's request for an initial informal resolution
meeting, and if the office decides to grant the request, the office
shall schedule the [an] initial informal resolution meeting [not
later than the 60th day after the date the office receives the
request, but the office shall schedule the meeting on a later date,
as determined by the office, if requested by the provider]. The
office shall 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]. A provider may
request a second informal resolution meeting [not later than the
20th day] after the date of the initial informal resolution
meeting. On receipt of a timely request, the office shall decide
whether to grant the provider's request for a second informal
resolution meeting, and if the office decides to grant the request,
the office shall schedule the [a] second informal resolution
meeting [not later than the 45th day after the date the office
receives the request, but the office shall schedule the meeting on a
later date, as determined by the office, if requested by the
provider]. The office shall 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]. A
provider must have an opportunity to provide additional information
before the second informal resolution meeting for consideration by
the office. 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). The informal resolution process shall run
concurrently with the administrative hearing process, and the
informal resolution process shall be discontinued once the State
Office of Administrative Hearings issues a final determination on
the payment hold. [However, a hearing initiated under Subdivision
(3) shall be stayed until the informal resolution process is
completed.]
(7) The office shall, in consultation with the state's
Medicaid fraud control unit, establish guidelines under which
payment holds or program exclusions:
(A) may permissively be imposed on a provider; or
(B) shall automatically be imposed on a provider.
(8) In accordance with 42 C.F.R. Sections 455.23(e)
and (f), on the determination that a credible allegation of fraud
exists, the office may 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) the office 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:
(i) is the sole community physician or the
sole source of essential specialized services in a community; or
(ii) 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) the office determines that a full or partial
payment hold is not in the best interests of Medicaid.
(9) The office may not impose a payment hold on claims
for reimbursement submitted by a provider for medically necessary
services for which the provider has obtained prior authorization
from the commission or a contractor of the commission unless the
office has evidence that the provider has materially misrepresented
documentation relating to those services.
(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). A confidential draft report on an audit
or investigation that concerns the death of a child may be shared
with the Department of Family and Protective Services. A draft
report that is shared with the Department of Family and Protective
Services remains confidential and is not subject to disclosure
under Chapter 552.
(p) The executive commissioner, on behalf of the office,
shall adopt rules establishing criteria:
(1) for opening a case;
(2) for prioritizing cases for the efficient
management of the office's workload, including rules that direct
the office 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.
(q) The executive commissioner, on behalf of the office,
shall 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:
(1) direction for categorizing provider violations
according to the nature of the violation and for scaling resulting
enforcement actions, taking into consideration:
(A) the seriousness of the violation;
(B) the prevalence of errors by the provider;
(C) the financial or other harm to the state or
recipients resulting or potentially resulting from those errors;
and
(D) mitigating factors the office determines
appropriate; and
(2) a specific list of potential penalties, including
the amount of the penalties, for fraud and other Medicaid
violations.
(r) The office shall review the office's investigative
process, including the office's use of sampling and extrapolation
to audit provider records. The review shall be performed by staff
who are not directly involved in investigations conducted by the
office.
SECTION 3. Section 531.113, Government Code, is amended by
adding Subsection (d-1) and amending Subsection (e) as amended by
S.B. 219, Acts of the 84th Legislature, Regular Session, 2015, to
read as follows:
(d-1) The commission's office of inspector general shall:
(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)
and entities with which managed care organizations contract under
Subsection (a)(2);
(3) establish requirements for approving plans to
prevent and reduce fraud and abuse adopted by managed care
organizations under Subsection (b);
(4) evaluate statewide fraud, waste, and abuse trends
in Medicaid 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) The executive commissioner shall adopt rules as
necessary to accomplish the purposes of this section, including
rules defining the investigative role of the commission's office of
inspector general 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). The rules adopted
under this section must specify the office's role in:
(1) reviewing the findings of special investigative
units and contracted entities;
(2) investigating cases where the overpayment amount
sought to be recovered exceeds $100,000; and
(3) investigating providers who are enrolled in more
than one managed care organization.
SECTION 4. Section 531.118(b), Government Code, is amended
to read as follows:
(b) If the commission receives an allegation of fraud or
abuse against a provider from any source, the commission's office
of inspector general shall conduct a preliminary investigation of
the allegation to determine whether there is a sufficient basis to
warrant a full investigation. A preliminary investigation must
begin not later than the 30th day, and be completed not later than
the 45th day, after the date the commission receives or identifies
an allegation of fraud or abuse.
SECTION 5. Section 531.120(b), Government Code, is amended
to read as follows:
(b) A provider may [must] request an [initial] informal
resolution meeting under this section, and on [not later than the
30th day after the date the provider receives notice under
Subsection (a). On] receipt of the [a timely] request, the office
shall schedule the [an initial] informal resolution meeting [not
later than the 60th day after the date the office receives the
request, but the office shall schedule the meeting on a later date,
as determined by the office if requested by the provider]. The
office shall 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]. The informal
resolution process shall run concurrently with the administrative
hearing process, and the administrative hearing process may not be
delayed on account of the informal resolution process. [A provider
may request a second informal resolution meeting not later than the
20th day after the date of the initial informal resolution
meeting. On receipt of a timely request, the office shall schedule
a second informal resolution meeting not later than the 45th day
after the date the office receives the request, but the office shall
schedule the meeting on a later date, as determined by the office if
requested by the provider. The office shall 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. A provider must have an opportunity to provide
additional information before the second informal resolution
meeting for consideration by the office.]
SECTION 6. Section 531.1201(b), Government Code, is amended
to read as follows:
(b) The commission's office of inspector general is
responsible for the costs of an administrative hearing held under
Subsection (a), but a provider is responsible for the provider's
own costs incurred in preparing for the hearing [Unless otherwise
determined by the administrative law judge for good cause, at any
administrative hearing under this section before the State Office
of Administrative Hearings, the state and the provider shall each
be responsible for:
[(1) one-half of the costs charged by the State Office
of Administrative Hearings;
[(2) one-half of the costs for transcribing the
hearing;
[(3) the party's own costs related to the hearing,
including the costs associated with preparation for the hearing,
discovery, depositions, and subpoenas, service of process and
witness expenses, travel expenses, and investigation expenses; and
[(4) all other costs associated with the hearing that
are incurred by the party, including attorney's fees].
SECTION 7. Subchapter C, Chapter 531, Government Code, is
amended by adding Section 531.1203 to read as follows:
Sec. 531.1203. RIGHTS OF AND PROVISION OF INFORMATION TO
PHARMACIES SUBJECT TO CERTAIN AUDITS. (a) A pharmacy has a right
to request an informal hearing before the commission's appeals
division to contest the findings of an audit conducted by the
commission's office of inspector general 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) In an informal hearing held under this section, staff of
the commission's appeals division, assisted by staff responsible
for the commission's vendor drug program who have expertise in the
law governing pharmacies' participation in Medicaid, make the final
decision on whether the findings of an audit are accurate. Staff of
the commission's office of inspector general may not serve on the
panel that makes the decision on the accuracy of an audit.
(c) In order to increase transparency, the commission's
office of inspector general shall, if the office has access to the
information, provide to pharmacies that are subject to audit by the
office 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
Medicaid.
SECTION 8. The following provisions are repealed:
(1) Section 531.1201(c), Government Code; and
(2) Section 32.0422(k), Human Resources Code, as
amended by S.B. 219, Acts of the 84th Legislature, Regular Session,
2015.
SECTION 9. Notwithstanding Section 531.004, Government
Code, the Sunset Advisory Commission shall conduct a
special-purpose review of the overall performance of the Health and
Human Services Commission's office of inspector general. In
conducting the review, the Sunset Advisory Commission shall
particularly focus on the office's investigations and the
effectiveness and efficiency of the office's processes, as part of
the Sunset Advisory Commission's review of agencies for the 87th
Legislature. The office is not abolished solely because the office
is not explicitly continued following the review.
SECTION 10. 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 the Health and Human
Services Commission 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. The change in law
applies only to a person appointed as inspector general on or after
the effective date of this Act.
SECTION 11. Section 531.102, Government Code, as amended by
this Act, applies only to a complaint or allegation of Medicaid
fraud or abuse received by the Health and Human Services Commission
or the commission's office of inspector general on or after the
effective date of this Act. A complaint or allegation received
before the effective date of this Act is governed by the law as it
existed when the complaint or allegation was received, and the
former law is continued in effect for that purpose.
SECTION 12. Not later than March 1, 2016, the executive
commissioner of the Health and Human Services Commission shall
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 may be placed on claims for
reimbursement submitted by a Medicaid provider.
SECTION 13. Sections 531.120 and 531.1201, Government Code,
as amended by this Act, apply only to a proposed recoupment of an
overpayment or debt of which a provider is notified on or after the
effective date of this Act. A proposed recoupment of an overpayment
or debt that a provider was notified of before the effective date of
this Act is governed by the law as it existed when the provider was
notified, and the former law is continued in effect for that
purpose.
SECTION 14. Not later than March 1, 2016, the executive
commissioner of the Health and Human Services Commission shall
adopt rules necessary to implement Section 531.1203, Government
Code, as added by this Act.
SECTION 15. 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 16. This Act takes effect September 1, 2015.
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