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Approach to Medicaid Fraud Investigations Has Supporters and Critics

Medicaid fraud officials have won rave reviews for a new dollar-recovery strategy that lets them freeze funding to accused health providers while they pursue an investigation. But some doctors and dentists say there's no due process.

Health and Human Services Commission Inspector General Douglas Wilson, left, and Deputy Inspector General Jack Stick, right, in the evidence room of the state Office of Inspector General in Austin on June 18, 2012.

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This article is the third of an occasional series on the consequences of state efforts to curb spiraling health costs, and the dollars lawmakers might target in the future. 

When it comes to finding cost savings in the state’s unwieldy Medicaid program, the Health and Human Services Commission’s Office of Inspector General gets high marks.  

The division, charged with investigating fraud among health providers paid to treat poor children and the disabled, has dramatically increased both its caseload and the potential monetary returns associated with it over the last fiscal year, a spike that has won rave reviews from budget-weary state lawmakers and has cast Texas’ innovative enforcement team into the national spotlight.

“The message to those providers out there who see the Medicaid program as an ATM, who use it to make monthly withdrawals to buy jets and $8 million houses, is that there’s a different inspector general’s office now,” said Jack Stick, HHSC’s deputy inspector general. “We have an amazingly dedicated staff that’s working until 10, 11, 12 at night, every night, because they’re excited about catching these guys.”

But OIG’s dollar-recovery strategy — which includes an increased reliance on a rule that allows investigators to freeze financing for any health provider accused of overbilling — has enraged doctors, dentists and other providers who treat Medicaid patients. They say an anonymous call to a fraud hotline or a computer-generated analysis of a handful of billing codes is enough to halt their financing without so much as a hearing, jeopardizing their practices and employees and leaving thousands of needy patients in a lurch while the state works to prove — or rule out — abuse.

“It’s like having an atom bomb dropped on my business. I could lose everything,” said one doctor who asked not to be named pending the outcome of his Medicaid fraud investigation, which has lasted months. “I’ve had to cut wages. People are worried about their jobs. We’re pariahs at this point. It’s been real hell.” 

When Douglas Wilson took over as HHSC’s inspector general last year, he approached the job from an accounting background. Traditionally, he said, the division had operated like a law enforcement agency, performing lengthy investigations to get cases ready for criminal prosecution. Instead, he wanted to halt the flow of financing to questionable providers at the first sign something was amiss.

To help execute this culture shift, Wilson hired a deputy, Stick, a past municipal judge and former state legislator who in 2003 helped write one of the leanest budgets in state history, along with the bill language that created the HHSC inspector general’s office.

Together, they have redirected the office’s resources to put a greater focus on investigations with the biggest potential monetary returns, and on Medicaid providers, not recipients. They cut the time it took to work a case down from three or four years to eight weeks with just a slight increase in budget. In the last fiscal year, the dollars identified for possible recovery have increased by more than 1,200 percent.

And they increasingly utilized “payment holds.” In fiscal 2011, OIG added 12 providers to the list of those with frozen financing; so far this year, they have imposed payment holds on another 88 providers.

The majority of those were “Credible Allegation of Fraud,” or CAF, holds — a provision in the new federal health reform law that authorizes states to suspend Medicaid payments if allegations of fraud have an “indicia of reliability.” What this means, Wilson said, is that fraud investigators no longer must work their cases to “beyond a reasonable doubt”; all they need is a “preponderance of the evidence” to keep state dollars in the bank while they conduct full-scale investigations.

“We don’t want to be the inspector general’s office that comes to the battlefield after there’s a battle,” Stick said. Added Wilson: “When we’re going after them after the fact, they’ve already spent our money.”

It is hard to quantify just how well OIG’s new strategy is working; it can take months or even years to recover dollars in a fraud case, and the office’s goal is to prevent unnecessary spending in the first place, which is harder to tabulate. But Stick said the potential dollars associated with their increased investigations, a number they will release at the end of the fiscal year, “will be stunning.”

Rocky Wilcox, vice president and general counsel for the Texas Medical Association, said the only thing that's stunning is how little due process doctors targeted by Medicaid fraud investigations have. Right now, he said, the OIG can look at a handful of charts, turn thousands of dollars in questionable billing into millions of dollars in estimated fines and penalties, and pursue a lengthy investigation, all while the doctor’s financing and needy patients hang in the balance. When the doctors are called in, the investigators often are not familiar with common medical terms, he said, and the doctors have to educate them.

In one recent case, Wilcox said, OIG cut off financing to Carousel Pediatrics — which treats 40,000 children in Central Texas, 90 percent of them on Medicaid — alleging that the clinics owed the state more than $20 million for making what investigators believed were billing errors. After the state’s HMOs and Medicaid managed care plans came to Carousel’s defense, he said, the OIG allowed payments to resume. 

“If the doctor had a right to some sort of preliminary hearing early on,” Wilcox said, “it would force the state to do its homework better.”

Officials with the OIG say they do not discuss ongoing investigations, but that they consider all factors in a case and make “good cause exceptions to policy when appropriate,” especially when the care of clients is at risk.

Dr. Robert Anderton, a dentist and lawyer who represents health providers in Medicaid fraud investigations, said the first “CAF” hold he witnessed was last year, in the midst of HHSC’s investigation into Medicaid reimbursement for orthodontia. (As of this month, the agency is holding $9 million in suspended payments, nearly $8 million of it to dental and orthodontic providers.)

 “After that, it was just like dominoes,” said Anderton, who now has roughly 15 clients in similar scenarios. “One case after another, they put on hold.” 

Providers facing fraud investigations struggle to get even a preliminary hearing before the state, said Anderton, a past president of the American Dental Association and the Texas Dental Association. In the meantime, they are declaring bankruptcy, closing their doors and giving up on Medicaid, which is already facing a provider shortage due to low reimbursement rates, he said. They are leaving thousands of patients, many of them children, without health care, he added, especially in remote areas of the state.

“If there’s fraud, let’s take care of that. If there’s misappropriations, let’s get it settled,” he said. “But we’ve got a huge Medicaid population in Texas. It’s a totally unfair violation of due process just to stop these funds.”

Wilson and Stick say the idea that there is no due process is preposterous. Investigators do thorough reviews before halting financing and hire physicians to help with cases that require medical expertise. Anyone who thinks they are uninformed about their subjects does not understand basic investigative tactics, they argue.

And while they acknowledge it can take months for providers to get a state administrative hearing over allegations, they say the OIG gives them the chance to come in for an informal review to make their case at any time. Providers can always negotiate a settlement — which some do to bring an investigation to a quick close. If the allegations are unfounded, Wilson and Stick say, the unpaid money is reimbursed and the tap is turned back on.

“To any provider who says, ‘We’re being targeted blindly,’ our message is, we aren’t targeting anybody. The data tells us who to look at,” Stick said. “There are intentional acts and there are inadvertent acts, unknowing acts. We recognize the difference.”

If anything, the budget pressures of the last session — and lawmakers’ estimation that they could save an extra $50 million over the biennium by increasing fraud investigations — have made this dollar recovery and cost prevention even more crucial. Wilson and Stick say their next strategy is to employ cutting-edge technology that could make Texas even more of a national leader in such investigations. 

“Last session confirmed the fact that this office needs to be aggressive about pursuing fraud, waste and abuse,” Wilson said. “It’s what we’re charged to do. We can’t be bashful about it.”

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