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OIG Releases Medicaid Control Units FY 2016 Annual Report

May 31, 2017

In May 2017, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) released its annual report of the Medicaid Fraud Control Units (MFCU) for FY 2016. The annual reports provide statistical data from the outcomes of MFCU investigations in the previous fiscal year, as well as notable changes in MFCU practices nationwide.

The MFCU’s mission is “to investigate and prosecute under State law Medicaid provider fraud and patient abuse or neglect” and will also investigate complaints of misappropriation of patients’ private funds in residential health care facilities. Every U.S. jurisdiction must operate a MFCU, unless HHS determines that operating one would not be cost effective because minimal Medicaid fraud exists in the jurisdiction, or that the jurisdiction has other adequate safeguards to protect Medicaid beneficiaries from abuse or neglect. Currently, North Dakota and the U.S. territories are the only jurisdictions without MFCUs.

OIG annually recertifies each unit, assessing compliance with the Federal requirements for MFCUs. OIG collects and disseminates statistical data reported by the MFCUs regarding outcomes such as the number of convictions and amounts of recoveries.

In FY 2016, MFCUs reported 1,564 convictions – continuing a trend of increasing numbers of convictions; 998 civil settlements and judgments – the highest in the last 5 years; and almost $1.9 billion in criminal and civil recoveries – an average of more than $7 recovered for every dollar spent by the MFCUs.

The 1,564 convictions marks a general increase in convictions over the past five years, though abuse or neglect convictions decreased from FY 2015. Of those convictions, the largest group of defendants involved personal care services (PCS) – PCS attendants, representatives of PCS agencies, or other home care aides. Next came nurses, nurse aids, and physician assistants (PAs).

Fraud was involved in 74% of convictions, almost half of which involved unlicensed providers. Of fraud convictions of outpatient facilities or their personnel, 82% involved mental health facilities or substance abuse treatment centers. Of the remaining convictions – for patient abuse or neglect – over half of defendants were nurses, nurse aids, or PAs. Abuse or neglect convictions decreased from FY 2015, but still accounted for 26% of convictions (404 of 1,564).

Civil settlements and judgments also continued to trend up – reaching a five-year high. In FY 2016, nearly half of these involved pharmaceutical manufacturers, typically following investigations of prescription drug marketing practices. Over half of FY 2016 civil recovery dollars are attributable to settlements of global cases against two pharmaceutical manufacturers that totaled $982 million. Global recoveries accounted for 81% of civil recoveries, a significant uptick from recent years. MFCUs also achieved civil settlements with and judgments against laboratories, medical device manufacturers, and retail and wholesale pharmacies.

In recent years, MFCUs have also increased drug diversion investigations. In FY 2016, these cases accounted for 12% of all convictions and resulted in $15.7 million in recoveries. They usually involve fraudulent billing for a drug not delivered to the intended beneficiary and diverted from legal and medically necessary uses.

In many circumstances following a conviction, settlement, or judgment, OIG has the authority to exclude individuals and entities from Federal health care programs. After peaking in FY 2014, the number of exclusions has declined in FY 2015 and FY 2016, but the number of exclusions for these three years is still substantially higher than in years prior. For FY 2016, OIG exclusions resulting from MFCU conviction referrals totaled 1,284.

In its report, OIG identified a number of strategies adopted by MFCUs that have increased the quality and volume of fraud, abuse, and neglect referrals to the MFCU, and both MFCU’s and OIG’s ability to pursue these referrals, over the last six years. Most significantly, MFCUs have substantially increased their collaboration with other state and federal agencies to streamline investigations and to train those entities and personnel in identifying and referring possible cases of fraud, abuse, and neglect. For example, MFCU and OIG staff have begun to share office space, fostering greater collaboration on multi-jurisdiction investigations.

In addition to their other investigative capabilities, MFCU’s across the nation have applied to OIG for permission to use data mining to identify fraud through the screening and analyzing of billing data. So far, MFCUs in Michigan, Missouri, Oklahoma, California, Louisiana, Indiana, Florida, New York, Rhode Island, and New Mexico have received approval to conduct data mining operations.

In light of the increase in MFCU capabilities for investigating possible cases of fraud, abuse, and neglect, and the return on investment ($7 returned for every MFCU dollar spent) achieved in the cases that are investigated, there is little doubt that health care providers will continue to face scrutiny from these government agencies.

If you are facing an audit, subpoena, or other inquiry from a Medicaid Fraud Control Unit or other government enforcement agency and have questions about how to respond, please contact Eric Atkinson (former Chief of Fraud and Corporate Neglect Investigations for a prominent MFCU), Mike Gill (former federal prosecutor and DEA Chief of Staff), or another member of HDJN’s Healthcare Investigations and Enforcement Actions team.

The information contained in this advisory is for general educational purposes only. It is presented with the understanding that neither the author nor Hancock, Daniel, Johnson & Nagle, PC, is offering any legal or other professional services. Since the law in many areas is complex and can change rapidly, this information may not apply to a given factual situation and can become outdated. Individuals desiring legal advice should consult legal counsel for up-to-date and fact-specific advice. Under no circumstances will the author or Hancock, Daniel, Johnson & Nagle, PC be liable for any direct, indirect, or consequential damages resulting from the use of this material.