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State Medicaid Probes Produce Paltry Results

Three years ago, the office responsible for rooting out Medicaid fraud and abuse set a goal of finding $1 billion a year in misspent funds. But it's collecting about $995 million less than that.

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On a rainy day in February three years ago, about 30 men and women recently hired by the state filed into a dull government classroom to begin a week of training for their new positions. 

Texas funnels a river of federal and state money — at that time $28 billion and change each year — out to doctors, dentists, labs and other medical providers to pay them for treating Medicaid patients. There is little doubt, the trainees were told, that some percentage of it is wasted, paid out by mistake or flat-out stolen by fraudulent providers.

As Medicaid investigators for the Office of Inspector General, they were to track down that errant money and get it back for taxpayers.

"I want you to be aggressive," they were instructed by Jack Stick, then deputy inspector general for the Health and Human Services Commission, according to a video of the Feb. 6, 2012, training obtained by The Texas Tribune. "I want you go out there find out what’s wrong and fix it."

As if to hammer the point home, Lynn Blackmore, director of the Office of Inspector General's Medicaid fraud unit, told the new recruits that this was their money. 

"If you’re a success, you're protecting your own taxpayer dollars," Blackmore said. 

Stick set out a herculean task for his new charges: find $1 billion worth of Medicaid overpayments made to health care providers in Texas.

"I’m here to help you get from where we are now to a billion dollars. A billion dollars," Stick told the group. "With your help, we’ll get there. Good luck, guys. Thank you."

But records show the annual goal set by Stick and other OIG supervisors was not only lofty, it was pointless for this watchdog unit created in 2003 and charged with combing through claims data and investigating waste and fraud complaints.

Fraud investigators with the inspector general's Medicaid Provider Integrity, or MPI, unit haven't come anywhere close to finding that much in annual overpayments made to health care providers in Texas despite pricey badges and a $20 million fraud tracking software that came to HHSC a year after the training video was made.

The department now faces a criminal investigation and two other reviews over how that software contract was awarded to Austin firm 21CT, and is struggling to remain relevant as lawmakers discuss collapsing HHSC with the four other social services agencies it manages. Both Stick and his former boss, inspector general Doug Wilson, were forced to resign over the contract. 

And last month, state Sen. Charles Schwertner, R-Georgetown and chairman of the Senate Health and Human Services Committee, told agency officials that whatever happens going forward has got to be better.  

"The bottom line is, I think the Legislature, and I personally, have lost confidence in the Medicaid OIG," Schwertner said.

Whatever comes next for the office, its track history for its core duties — finding abuse, waste and fraud — has been suspect for years.

In fact, less than 1 percent of the money what investigators discover as overpayments, whether caused by fraud or oversight, is actually collected, according to last year's blistering Sunset Advisory Commission report

The report proved for the first time since OIG's creation that the actual return on the investigators' gumshoe efforts is minimal, and that most of the legwork is done by government health care contractors paid to monitor their own billing records for the state.  

"OIG reports that it identified $1.1 billion in Medicaid provider overpayments in fiscal years 2012 and 2013," the Sunset staff wrote. "But only $5.5 million in provider overpayments was collected in that time frame.” 

Rep. Garnet Coleman, a Houston Democrat, believes OIG’s preoccupation with fraud has done more harm than good, and he offered this more succinct analysis of the department’s track record.

"It sounds like the juice isn't worth the squeeze," he said.

For more than a decade, the OIG unit has been able to keep lawmakers and the public in the dark with fuzzy details about exactly how much it brings in, obscuring its results with with buzzy financial terms like "total cost recoveries" and "identified overpayments."

Neither term really tells anyone what was actually collected, the Sunset staff confirmed to the Tribune. For example, HHSC pointed to a document in February, muddily named the "Summary of Cost Recovery and Cost Avoidance Dollars to Date," as proof of what it has collected in Medicaid overpayments from 2004 to 2013.

Taken at face value, it indicates that OIG's "total cost recovery" from medical providers was between $300 and $400 million each year. 

Not exactly, according to Sunset staff. 

In fact, what OIG reported as recovered Medicaid dollars, or "total cost recovery," was actually dollars the office estimated would be collected, not what was actually collected. The best estimate of dollars actually collected is the $5.5 million both fiscal years 2012 and 2013, the commission said.

For years, the inspector general's office has touted the work of its investigators, crediting them and the taxpayer-funded resources lawmakers gave them as making a serious difference in the war on Medicaid fraud. In the past three years, OIG's entire budget has spiked 30 percent to $48.9 million in the fiscal year that ended last August and now boasts 770 employees including the Medicaid provider investigators.   

"We devoted more resources to our provider investigations to allow us a greater probability of recoupment of overpayments," then-Inspector General Doug Wilson told the House Committee on Government Efficiency and Reform in 2013.

In that meeting with House lawmakers, Wilson talked about how a reorganization, infusion of new staff and a healthy assist from a new and untested software tool from contractor 21CT were going to pay dividends when it came to tracking down Medicaid overpayments.

"We, as a result of those changes, experienced improvements in our productivity," Wilson said, pointing to how in fiscal year 2011 there were only 12 Medicaid provider investigations. A year later, that number rose dramatically to a whopping 108 investigations.

But most of the eye-catching collection numbers — the few Sunset staff have been able to find — have nothing to do with OIG investigators’ work, but instead come from HHSC's health care contractors.

Those contractors are constantly filtering Medicaid claims to make sure patients weren’t already covered by private insurance.

That happens when patients don't know if they have insurance. If, for instance, a teenager lands in the emergency room with a broken arm and has no clue what insurance his or her parents use, the hospital will file a claim under Medicaid. But the state of Texas employs contractors to filter through Medicaid claims, and if that teen was covered by a private insurer, he or she will get the money back from that insurance company.

"Overall, almost 80 percent of OIG's $273 million total money recovered in fiscal 2013 came from third-party liability collections, a data-matching function for other insurance payers that is not related to fraud, waste and abuse and that in many states is housed within the Medicaid program, not OIG," the Sunset report found. 

In its defense, Coleman says the inspector general's office has a tough time with investigations actually recovering money because the department was never designed to get results. 

"I think that it didn't matter if OIG was working to get results," Coleman said, adding that the department's creation was more about appearances than results. "That wasn't the objective; it was the optics."  

HHSC spokeswoman Stephanie Goodman concedes that OIG's performance shortcomings noted in the Sunset report were valid.

"Sunset points out that there are inefficiencies, that we're not using this resource in the most effective way," she said. 

But as the agency moves forward with a new inspector general — Stuart Bowen Jr. was confirmed by lawmakers last month — there were be a number of reforms to the way Medicaid fraud investigations are handled.

"We'll be giving providers more guidance at the front end," she said, to prevent overpayments from piling up from the start. 

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