By: Sparks S.B. No. 1038
(In the Senate - Filed January 31, 2025; February 24, 2025,
read first time and referred to Committee on Health & Human
Services; March 24, 2025, reported adversely, with favorable
Committee Substitute by the following vote: Yeas 7, Nays 1;
March 24, 2025, sent to printer.)
Click here to see the committee vote
COMMITTEE SUBSTITUTE FOR S.B. No. 1038 By: Perry
A BILL TO BE ENTITLED
AN ACT
relating to administrative remedies for certain fraud and abuse
violations under Medicaid; providing administrative penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Sections 544.0205(a) and (b), Government Code,
as effective April 1, 2025, are amended to read as follows:
(a) The commission may grant an award to an individual who
reports activity that constitutes fraud or abuse of Medicaid funds
or who reports Medicaid overcharges if the commission determines
that the disclosure results in the recovery of a remedy [an
administrative penalty] imposed under Section 32.039, Human
Resources Code. The commission may not grant an award to an
individual in connection with a report if the commission or
attorney general had independent knowledge of the activity the
individual reported.
(b) The commission shall determine the amount of an
award. The award may not exceed five percent of the amount of the
remedy [administrative penalty] imposed under Section 32.039,
Human Resources Code, that resulted from the individual's
disclosure. In determining the award amount, the commission:
(1) shall consider how important the disclosure is in
ensuring the fiscal integrity of Medicaid; and
(2) may consider whether the individual participated
in the fraud, abuse, or overcharge.
SECTION 2. The heading to Section 32.039, Human Resources
Code, is amended to read as follows:
Sec. 32.039. ADMINISTRATIVE REMEDIES [DAMAGES AND
PENALTIES].
SECTION 3. Section 32.039(a), Human Resources Code, is
amended by amending Subdivision (1) and adding Subdivision (3-a) to
read as follows:
(1) "Claim" means an application, request, or demand
for a benefit or payment [of health care services] under Title XIX
of the [federal] Social Security Act (42 U.S.C. Section 1396 et
seq.) [that is submitted by a person who is under a contract or
provider agreement with the commission].
(3-a) "Material" means having a natural tendency to
influence or to be capable of influencing.
SECTION 4. Section 32.039, Human Resources Code, is amended
by adding Subsections (a-1), (a-2), (c-1), and (c-2) and amending
Subsections (b), (c), (d), (f), (g), (h), (i), (k), (l), (m), (n),
(o), (p), (q), (r), (s), and (x) to read as follows:
(a-1) For purposes of this section, a person acts knowingly
with respect to information if the person:
(1) has knowledge of the information;
(2) acts with conscious indifference to the truth or
falsity of the information; or
(3) acts in reckless disregard of the truth or falsity
of the information.
(a-2) Proof of the person's specific intent to commit a
violation under this section is not required in a civil or
administrative proceeding to show that the person acted "knowingly"
with respect to information under this section.
(b) A person commits a violation if the person:
(1) knowingly submits [presents] or causes to be
submitted [presented to the commission] a claim that contains:
(A) a false statement;
(B) a misrepresentation; or
(C) an omission of a material fact
[representation the person knows or should know to be false];
(2) [(1-a)] engages in conduct that violates Section
102.001, Occupations Code;
(3) [(1-b)] solicits or receives, directly or
indirectly, overtly or covertly any remuneration, including any
kickback, bribe, or rebate, in cash or in kind for referring an
individual to a person for the furnishing of, or for arranging the
furnishing of, any item or service for which payment may be made, in
whole or in part, under the medical assistance program, provided
that this subdivision does not prohibit the referral of a patient to
another practitioner within a multispecialty group or university
medical services research and development plan (practice plan) for
medically necessary services;
(4) [(1-c)] solicits or receives, directly or
indirectly, overtly or covertly any remuneration, including any
kickback, bribe, or rebate, in cash or in kind for purchasing,
leasing, or ordering, or arranging for or recommending the
purchasing, leasing, or ordering of, any good, facility, service,
or item for which payment may be made, in whole or in part, under the
medical assistance program;
(5) [(1-d)] offers or pays, directly or indirectly,
overtly or covertly any remuneration, including any kickback,
bribe, or rebate, in cash or in kind to induce a person to refer an
individual to another person for the furnishing of, or for
arranging the furnishing of, any item or service for which payment
may be made, in whole or in part, under the medical assistance
program, provided that this subdivision does not prohibit the
referral of a patient to another practitioner within a
multispecialty group or university medical services research and
development plan (practice plan) for medically necessary services;
(6) [(1-e)] offers or pays, directly or indirectly,
overtly or covertly any remuneration, including any kickback,
bribe, or rebate, in cash or in kind to induce a person to purchase,
lease, or order, or arrange for or recommend the purchase, lease, or
order of, any good, facility, service, or item for which payment may
be made, in whole or in part, under the medical assistance program;
(7) [(1-f)] provides, offers, or receives an
inducement in a manner or for a purpose not otherwise prohibited by
this section or Section 102.001, Occupations Code, to or from a
person, including a recipient, provider, employee or agent of a
provider, third-party vendor, or public servant, for the purpose of
influencing or being influenced in a decision regarding:
(A) selection of a provider or receipt of a good
or service under the medical assistance program;
(B) the use of goods or services provided under
the medical assistance program; or
(C) the inclusion or exclusion of goods or
services available under the medical assistance program;
(8) knowingly makes or causes to be made a false
statement or misrepresentation of a material fact to permit a
person to receive a benefit or payment under the medical assistance
program that is not authorized or that is greater than the benefit
or payment that is authorized;
(9) knowingly conceals or fails to disclose
information that permits a person to receive a benefit or payment
under the medical assistance program that is not authorized or that
is greater than the benefit or payment that is authorized;
(10) knowingly applies for and receives a benefit or
payment on behalf of another person under the medical assistance
program and converts any part of the benefit or payment to a use
other than for the benefit of the person on whose behalf it was
received;
(11) knowingly makes, causes to be made, induces, or
seeks to induce the making of a false statement or
misrepresentation of a material fact concerning the conditions or
operation of a facility in order that the facility may qualify for
certification or recertification under the medical assistance
program, including certification or recertification as:
(A) a hospital;
(B) a nursing facility or skilled nursing
facility;
(C) a hospice provider;
(D) an intermediate care facility for
individuals with an intellectual disability;
(E) an assisted living facility; or
(F) a home and community support services agency;
(12) knowingly makes, causes to be made, induces, or
seeks to induce the making of a false statement or
misrepresentation of a material fact concerning information
required to be provided under a federal or state law, rule,
regulation, or provider agreement pertaining to the medical
assistance program;
(13) knowingly presents or causes to be presented a
claim for payment for a product provided or a service rendered by a
person who:
(A) is not licensed to provide the product or
render the service, if a license is required; or
(B) is not licensed in the manner claimed;
(14) knowingly makes or causes to be made a claim for:
(A) a service or product that has not been
approved or accepted by a treating physician or health care
practitioner;
(B) a service or product that is substantially
inadequate or inappropriate as compared to generally recognized
standards within the particular discipline or within the health
care industry; or
(C) a product that has been adulterated, debased,
or mislabeled, or that is otherwise inappropriate;
(15) makes a claim and knowingly fails to indicate the
type of license of the provider who actually provided the service;
(16) makes a claim and knowingly fails to indicate the
identification number of the licensed provider who actually
provided the service;
(17) knowingly obstructs the office of inspector
general from carrying out the office's duties under Section
544.0103, Government Code;
(18) knowingly makes, uses, or causes the making or
use of a false record or statement material to an obligation to pay
or transmit money or property to this state under the medical
assistance program, or knowingly conceals or knowingly and
improperly avoids or decreases an obligation to pay or transmit
money or property to this state under the medical assistance
program;
(19) [(2)] is a managed care organization that
contracts with the commission to provide or arrange to provide
health care benefits or services to individuals eligible for
medical assistance and:
(A) fails to provide to an individual a health
care benefit or service that the organization is required to
provide under the contract with the commission;
(B) fails to provide to the commission or other
appropriate agency information required to be provided by law,
commission or agency rule, or contractual provision;
(C) engages in a fraudulent activity in
connection with the enrollment in the organization's managed care
plan of an individual eligible for medical assistance or in
connection with marketing the organization's services to an
individual eligible for medical assistance; or
(D) engages in actions that indicate a pattern
of:
(i) wrongful denial of payment for a health
care benefit or service that the organization is required to
provide under the contract with the commission; or
(ii) wrongful delay of at least 45 days or a
longer period specified in the contract with the commission, not to
exceed 60 days, in making payment for a health care benefit or
service that the organization is required to provide under the
contract with the commission; [or]
(20) [(3)] fails to maintain documentation to support
a claim for payment in accordance with the requirements specified
by commission rule or medical assistance program policy; or
(21) engages in any other conduct that a commission
rule has defined as a violation of the medical assistance program.
(c) A person who commits a violation under Subsection (b) is
liable to the commission for the following administrative remedy:
(1) the amount paid or benefit received, if any,
directly or indirectly as a result of the violation, including any
payment made to a third party, and interest on that amount
determined at the rate provided by law for legal judgments and
accruing from the date on which the payment was made; and
(2) payment of an administrative penalty of an amount
not to exceed twice the amount paid, if any, as a result of the
violation, plus an amount:
(A) not less than $5,000 or more than $15,000 or
the maximum dollar amount imposed as provided by 31 U.S.C. Section
3729(a)(1), if that amount exceeds $15,000, for each violation that
results in injury to an elderly person, as defined by Section
48.002(a)(1), a person with a disability, as defined by Section
48.002(a)(8)(A), or a person younger than 18 years of age; or
(B) not more than $10,000 or the maximum dollar
amount imposed as provided by 31 U.S.C. Section 3729(a)(1), if that
amount exceeds $10,000, for each violation that does not result in
injury to a person described by Paragraph (A).
(c-1) For purposes of Subsection (c)(2), each day a person
violates Subsection (b)(17), (18), or (19) constitutes a separate
violation.
(c-2) Notwithstanding Subsection (c), a person who commits
a violation described by Subsection (b)(20) is liable to the
commission for, as determined by the commission, either:
(1) the amount paid in response to the claim for
payment; or
(2) the payment of an administrative penalty in an
amount not to exceed $500 for each violation.
(d) Unless the provider knowingly submitted false or
misleading information to the commission for use in preparing a
voucher [that the provider knew or should have known was false] or
knowingly failed to correct false or misleading information [that
the provider knew or should have known was false] when provided an
opportunity to do so, this section does not apply to a claim based
on the voucher if the commission calculated and printed the amount
of the claim on the voucher and then submitted the voucher to the
provider for the provider's signature. In addition, the provider's
signature on the voucher does not constitute fraud. The executive
commissioner shall adopt rules that establish a grace period during
which errors contained in a voucher prepared by the commission may
be corrected without penalty to the provider.
(f) If after an examination of the facts the commission
concludes that the person committed a violation, the commission may
issue a preliminary report stating the facts on which it based its
conclusion, recommending that an administrative remedy [penalty]
under this section be imposed and recommending the amount of the
proposed remedy [penalty].
(g) The commission shall give written notice of the report
to the person charged with committing the violation. The notice
must include:
(1) a brief summary of the facts;
(2) [,] a statement of the amount of the recommended
remedy;
(3) [penalty, and] a statement of the person's right to
an informal review of:
(A) the alleged violation;
(B) [,] the amount of the recommended remedy;
[penalty,] or
(C) both the alleged violation and the amount of
the recommended remedy; and
(4) a description of the administrative and judicial
due process remedies available to the person [penalty].
(h) Not later than the 30th [10th] day after the date on
which the person charged with committing the violation receives the
notice, the person may either give the commission written consent
to the report, including the recommended remedy [penalty], or make
a written request for an informal review by the commission.
(i) If the person charged with committing the violation
consents to the remedy [penalty] recommended by the commission or
fails to timely request an informal review, the commission shall
assess the remedy [penalty]. The commission shall give the person
written notice of its action. The person shall pay the remedy
[penalty] not later than the 30th day after the date on which the
person receives the notice.
(k) Not later than the 30th [10th] day after the date on
which the person charged with committing the violation receives the
notice prescribed by Subsection (j), the person may make to the
commission a written request for a hearing. The hearing must be
conducted in accordance with Chapter 2001, Government Code.
(l) If, after informal review, a person who has been ordered
to pay a remedy [penalty] fails to request a formal hearing in a
timely manner, the commission shall assess the remedy [penalty].
The commission shall give the person written notice of its action.
The person shall pay the remedy [penalty] not later than the 30th
day after the date on which the person receives the notice.
(m) Within 30 days after the date on which the commission's
order issued after a hearing under Subsection (k) becomes final as
provided by Section 2001.144, Government Code, the person shall:
(1) pay the amount of the remedy [penalty];
(2) pay the amount of the remedy [penalty] and file a
petition for judicial review contesting the occurrence of the
violation, the amount of the remedy [penalty], or both the
occurrence of the violation and the amount of the remedy [penalty];
or
(3) without paying the amount of the remedy [penalty],
file a petition for judicial review contesting the occurrence of
the violation, the amount of the remedy [penalty], or both the
occurrence of the violation and the amount of the remedy [penalty].
(n) A person who acts under Subsection (m)(3) within the
30-day period may:
(1) stay enforcement of the remedy [penalty] by:
(A) paying the amount of the remedy [penalty] to
the court for placement in an escrow account; or
(B) giving to the court a supersedeas bond that
is approved by the court for the amount of the remedy [penalty] and
that is effective until all judicial review of the commission's
order is final; or
(2) request the court to stay enforcement of the
remedy [penalty] by:
(A) filing with the court a sworn affidavit of
the person stating that the person is financially unable to pay the
amount of the remedy [penalty] and is financially unable to give the
supersedeas bond; and
(B) giving a copy of the affidavit to the
executive commissioner by certified mail.
(o) If the executive commissioner receives a copy of an
affidavit under Subsection (n)(2), the executive commissioner may
file with the court, within five days after the date the copy is
received, a contest to the affidavit. The court shall hold a hearing
on the facts alleged in the affidavit as soon as practicable and
shall stay the enforcement of the remedy [penalty] on finding that
the alleged facts are true. The person who files an affidavit has
the burden of proving that the person is financially unable to pay
the amount of the remedy [penalty] and to give a supersedeas bond.
(p) If the person charged does not pay the amount of the
remedy [penalty] and the enforcement of the remedy [penalty] is not
stayed, the commission may forward the matter to the attorney
general for enforcement of the remedy [penalty] and interest as
provided by law for legal judgments. An action to enforce a remedy
[penalty] order under this section must be initiated in a court of
competent jurisdiction in Travis County or in the county in which
the violation was committed.
(q) Judicial review of a commission order or review under
this section assessing a remedy [penalty] is under the substantial
evidence rule. A suit may be initiated by filing a petition with a
district court in Travis County, as provided by Subchapter G,
Chapter 2001, Government Code.
(r) If a remedy [penalty] is reduced or not assessed, the
commission shall remit to the person the appropriate amount plus
accrued interest if the remedy [penalty] has been paid or shall
execute a release of the bond if a supersedeas bond has been posted.
The accrued interest on amounts remitted by the commission under
this subsection shall be paid at a rate equal to the rate provided
by law for legal judgments and shall be paid for the period
beginning on the date the remedy [penalty] is paid to the commission
under this section and ending on the date the remedy [penalty] is
remitted.
(s) A remedy [damage, cost, or penalty] collected under this
section is not an allowable expense in a claim or cost report that
is or could be used to determine a rate or payment under the medical
assistance program.
(x) Subsections (b)(3) [(b)(1-b)] through (7) [(1-f)] do
not prohibit a person from engaging in:
(1) generally accepted business practices, as
determined by commission rule, including:
(A) conducting a marketing campaign;
(B) providing token items of minimal value that
advertise the person's trade name; and
(C) providing complimentary refreshments at an
informational meeting promoting the person's goods or services;
(2) the provision of a value-added service if the
person is a managed care organization; or
(3) other conduct specifically authorized by law,
including conduct authorized by federal safe harbor regulations (42
C.F.R. Section 1001.952).
SECTION 5. Section 32.0391(a), Human Resources Code, is
amended to read as follows:
(a) A person commits an offense if the person intentionally
or knowingly commits a violation under Section 32.039(b)(3), (4),
(5), (6), or (7) [32.039(b)(1-b), (1-c), (1-d), (1-e), or (1-f)].
SECTION 6. Section 36.006, Human Resources Code, is amended
to read as follows:
Sec. 36.006. APPLICATION OF OTHER LAW. The application of a
civil remedy under this chapter does not preclude the application
of another common law, statutory, or regulatory remedy, except that
a person may not be liable for a civil remedy under this chapter and
an administrative remedy [civil damages or a penalty] under Section
32.039 if the civil remedy and administrative remedy [civil damages
or penalty] are assessed for the same act.
SECTION 7. The following provisions of the Human Resources
Code are repealed:
(1) Section 32.039(a)(4); and
(2) Section 32.039(b-1).
SECTION 8. Section 32.039, Human Resources Code, as amended
by this Act, applies only to a violation that occurs on or after the
effective date of this Act. A violation that occurs before the
effective date of this Act is governed by the law in effect on the
date the violation occurred, and that law is continued in effect for
that purpose.
SECTION 9. 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 10. This Act takes effect September 1, 2025.
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