In September of 1995, the Texas Medicaid Fraud Prevention Act, as enacted by the 74th Texas Legislature, went into effect. The Act, found in Chapter 36 of the Texas Human Resources Code,seeks to address and punish those individuals and entities, participating in the Medicaid program, found to have defrauded the State Medicaid program.
The greatest potential ramifications may apply especially to nursing homes, assisted living facilities, intermediate care facilities for the mentally retarded and home health providers. Although scarcely utilized since its enactment, the Texas Attorney General’s office has, within the past year, mobilized and directed resources and attention to the perceived problem of Medicaid fraud occurring within these industries.
The acts that could subject a provider to potential exposure under this Act can be found at VTCA Human Resources Code § 36.002 Unlawful Acts. This statute contains a laundry list of wrongful acts prohibited by the Act including :
(1) knowingly or intentionally makes or causes to be made a false statement or misrepresentation of a material fact:
(A) on an application for a contract, benefit, or payment under the Medicaid program; or
(B) that is intended to be used to determine a person’s eligibility for a benefit or payment under the Medicaid program;
or,
(4) knowingly or intentionally makes, causes to be made, induces, or seeks to induce the making of a false statement or misrepresentation of material fact concerning:
(A) the conditions or operation of a facility in order that the facility may qualify for certification or recertification required by the Medicaid program, including certification or recertification as:
(i) a hospital;
(ii) a nursing facility or skilled nursing facility;
(iii) a hospice;
(iv) an intermediate care facility for the mentally retarded;
(v) an assisted living facility; or
(vi) a home health agency; or
(B) information required to be provided by a federal or state law, rule, regulation, or provider agreement pertaining to the Medicaid program.
However, the one provision of which to be especially wary is the one concerning alleged substandard quality of care rendered by the provider. Under VTCA Human Resources Code § 36.002(7)(B), a provider may potentially be subject to an allegation of fraud if it:
knowingly or intentionally makes a claim under the Medicaid program for:
(B) a service or product that is substantially inadequate or inappropriate when compared to generally recognized standards within the particular discipline or within the health care industry;
The vague and broad language of this statute potentially exposes a provider to a Chapter 36 fraud case for the types of substandard quality of care “findings” obtained in reports prepared by survey teams from the Texas Department of Human Services.
It is the severe nature of the potential remedies and sanctions for findings of fraud that would encourage the Attorney General’s office to pursue these types of actions alone or in concert with other regulatory actions. The potential sanctions and remedies include:
— Mandatory suspension of provider agreement except for Nursing Homes and ICFMR
— Potential suspension or revocation of provider agreement
— Bar from Medicaid program for 10 years except for operators of Nursing Homes and ICFMR (See VTCA Human Resources Code § 36.005.)
- restitution
- interest from date payment made to date of restitution
- civil penalty $5000 to $15,000 for each act resulting in injury to elderly person, disabled person or minor
- civil penalty $1000 to $10,000 for each act not resulting in harm to elderly person, disabled person or minor
- two times the value of the payment
as well as:
- Attorney fees and costs for investigation may be awarded to Attorney General
(See VTCA Human Resources Code § 36.007 and 36.052 Civil Remedies.)
For example, if the government successfully prosecutes a fraud action against a nursing home for providing substandard care to a resident over a period of time encompassing ten days, the provider may be liable and may have to pay the government the amount of Medicaid money paid by the state to the nursing home for care for the resident, this amount times a factor of two, interest from the date of payment, a civil penalty of between $5000 and $15,000 per day of violation, as well as potential revocation of the provider agreement. Thus, the potential exists for a provider’s exposure to eclipse the $100,000 level for an arguably isolated incident.
Additionally, a potential exists for indictment and criminal sanctions ranging from a misdemeanor up to a first degree felony if the Medicaid payments amount to $200,000 or more.
The statute also has provisions that may limit a provider’s potential exposure if the provider discovers that a fraudulent act may have been committed. “Self Disclosure” limits the amount of the damages to no more than two times the value of the payment if the provider notified the Attorney General of all information known to the provider within 30 days of discovering the potential fraud AND if the attorney general had not already begun an investigation into the matter. For obvious reasons, including the potential for intense scrutiny by the regulatory agencies, utilizing this option should be given considerable thought and deliberation.
Finally, providers should be alerted to the Qui Tam provision of the Act. Under VTCA Human Resources Code § 36.101, a private person, or “whistle blower,” may bring action for violation of the “Unlawful Acts” in the name of the State and, if the State elects to proceed in the action, may be entitled to receive between 10% to 25% of the ultimate recovery or settlement of the action. What this means is that an insider of a provider company, who may have actually taken part in the “unlawful act,” may nevertheless profit from disclosing facts to the State authority that support the allegation of fraud.
How do you know if the State or the Federal government acting in conjunction with the State is targeting your company for a fraud investigation? Other than the obvious pre-dawn knock at the door by serious looking gentlemen and women donning “FBI” jackets, the more likely event that should tip you off to a fraud investigation is a Civil Investigative Demand, which is essentially a request for production of documents normally utilized in civil discovery, or a Request for an Examination under Oath, which is a request to take the deposition of some member of the provider’s organization. A likely candidate may be the CFO or controller of the organization.
Due to the serious nature of the potential sanctions available to the State, a provider that participates in the Medicaid program must maintain a working compliance system and develop an awareness of the types of activities to which the government is giving close scrutiny.
All information in this article is informational only and is not legal advice. Should you have any questions or a situation requiring advice, please contact an attorney.
Copyright 2004 by Garlo Ward, P.C., all rights reserved
Austin, Texas 78752-3714 USA
Telephone: 512-302-1103
Facsimilie: 512-302-3256
Email: Info@Garloward.com
