83rd Texas Legislature Makes Important Changes to Law Governing Without Notice Payment Holds on Medicaid Reimbursements


Over the past few years, the number of fraud investigations and without notice Medicaid payment holds initiated by the Texas Health and Human Services Commission-Office of the Inspector General (THHSC-OIG or Commission) has risen dramatically. This has been accompanied by public outcry on the part of Medicaid providers who have been hit with indefinite payment holds based on little or no evidence, payment holds which can stay in place indefinitely while the Office of the Inspector General conducts its full, and often lengthy investigation.

One of the more important health care bills passed by the 83rd Texas Legislature imparts much needed revisions to the statutes governing the THHSC- Office of the Inspector General's authority to impose without notice payment holds on Medicaid providers accused of fraud. The statutory changes by the Texas Legislature reflect an intense lobbying effort by Medicaid providers to add greater transparency, clearer standards, and more robust due process to without notice payment holds.

Pursuant to the Patient Protection and Affordable Care Act, more colloquially known as "Obamacare," states are required to withhold Medicaid payments to providers upon receipt of a "credible allegation of fraud." In Texas, responsibility for civil and administrative prosecution of Medicaid fraud rests with THHSC-Office of the Inspector General. Criminal investigation and prosecution for Medicaid fraud falls on the shoulders of the Medicaid Fraud Unit of the Texas Attorney General's Office. Oftentimes both of these agencies will pursue civil and criminal legal actions in concert.

Prior to the passage of the recent legislation there was no statutory definition of what constituted a "credible allegation of fraud," nor guidance on what kind evidence or preliminary investigation was required before the Office of the Inspector General could impose a without notice payment hold. Because of this, the THHSC-OIG was relatively unfettered in deciding when to impose a payment hold and many Medicaid providers complained this frequently resulted in payment holds being initiated based on little or no evidence of actual fraud.

More importantly, under the prior law a Medicaid provider who was the subject of a without notice payment hold had little to no opportunity to challenge the hold prior to the informal conference or contested case proceeding which would only occur after the completion of a full investigation by THHSC-OIG's. This full investigatory and administrative process can in many instances take one or more years.

Thus, even if the provider is eventually vindicated, or later settles their case through a partial repayment of the money received from Medicaid, in the interim the provider is denied all Medicaid reimbursement for ongoing care and services. For many providers, such as physician or dental practices catering to Medicaid patients, this is effectively a death sentence as they are forced to indefinitely shoulder the costs of providing care while continuing to pay overhead and satisfy payroll with only an uncertain hope of later reimbursement after their case is resolved and the payment hold removed. The new legislation remedies many of these defects by explicitly defining what constitutes a credible allegation of fraud, outlining the procedure the Commission is required to follow prior to making this determination, and affording an expedited informal conference and/or contested case hearing to a Medicaid provider who is the subject of a without notice payment hold.

Under the new statute distinct definitions are created for both an "allegation of fraud" and a "credible allegation of fraud." Significantly, these definitions make clear that an allegation of fraud can only be deemed credible after a careful case-by-case review that examines all allegations, facts, and evidence; a tip to the fraud hotline, claims data analysis, provider audit, or active law enforcement investigation in-and-of-themselves do not constitute a credible fraud allegation. Although much will depend on how these new standards are implemented by the THHSC-OIG, this is a helpful development as in the past many payment holds have been based entirely on one of the above listed factors which have now been deemed insufficient in the absence of further evidence of fraud.

In addition to better defining what constitutes a "credible allegation of fraud," and perhaps more importantly, what does not, the Texas Legislature now mandates that the Office of the Inspector General conduct a preliminary investigation prior to imposing a payment hold or proceeding to a full investigation. This preliminary investigation culminates in the generation of a report containing the underlying allegation, the evidence reviewed, the procedures used to conduct the investigation, the findings, and a determination of whether a full investigation is warranted. The revised statute also mandates that the Commission retain separate physician and dental directors who must ensure any investigative findings based on the necessity or quality of care be reviewed by a qualified expert. Although the actual impact of these provisions will largely depend on how they are implemented by the THHSC-OIG, ideally these changes will impart additional rigor to the process the Office of the Inspector General uses to screen fraud and abuse allegations for further investigation and the possible imposition of a payment hold.

Of greatest value, the Legislature has afforded Medicaid providers who are the subject of a without notice payment hold an expedited hearings process to either challenge this status or quickly settle their case. The new statutes mandate that the Commission include a recitation of a provider's procedural rights concurrent with notice that a payment hold has been imposed. These rights include the option to either immediately proceed to a contested case hearing at the State Office of Administrative Hearings within sixty days receipt of the notice letter or convene an informal conference with the option for a later contested case hearing should the informal conference fail to resolve their case. This development is significant as it allows the subject of a Medicaid payment hold to promptly challenge their status. Given this new check on their authority, the THHSC-Office of the Inspector General will likely spend more time building a case for fraud prior to deciding to implement a without notice payment hold.

Based on my experience representing Medicaid providers before the Office of the Inspector General and the Medicaid Fraud Control Unit, I view these statutory revisions as a positive step towards remedying abuses of the payment hold process. I have seen many clients devastated by a without notice payment hold due to the absence of any ready legal means to challenge this status prior to the completion of the Commission's full investigation. The new definitions and standards applicable to a preliminary investigation should also lead to more deliberation by the THHSC-OIG before the agency decides to initiate a hold.

If you are under investigation for Medicaid fraud or abuse by the Office of the Inspector General, it is imperative to contact an experienced attorney as soon as possible. The threat of a without notice payment hold is very real and the amount of money in controversy is typically significant. Moreover, the OIG often turns these cases over to the Medicaid Fraud Control Unit for possible criminal scrutiny. Medicaid fraud is a serious offense, carries significant prison time, and is often a career ender for a health care provider or business owner. It is crucial to find competent and experienced legal counsel at the very start of the matter as these cases have a tendency to quickly snowball and important legal rights can be unknowingly waived by the client or counsel unfamiliar with the applicable law and OIG process.

Texas State Board of Pharmacy's Agressive Use of Investigators


Within the last two weeks my firm has signed on as clients two pharmacists who have encountered first-hand the aggressive tactics used by investigators at the Texas State Board of Pharmacy. This is something I feel all pharmacists and pharmacy technicians need to be aware of so they do not inadvertently damage themselves or accidently forfeit their right to contest the Board’s charges.


The day after I had sent in my letter of representation to the Pharmacy Board regarding the first client, the pharmacist contacted me by phone to tell me that a Board investigator was at her pharmacy asking her to sign a sworn statement admitting to the Board’s allegations. I asked her to transfer the phone to the investigator who stated that he was not aware that my client was represented by an attorney. He apologized and it was clear that he was genuinely unaware that the pharmacist was represented. Nonetheless had my client been unable to get in contact with me at that moment she may have made potentially harmful admissions.


The second client informed me that the evening before he retained me an investigator showed up at his home to essentially interrogate him and, again, have him sign a sworn statement admitting to the Board’s allegations. The investigator represented himself as both an employee of the Board and a licensed peace officer. He asked numerous loaded questions in his quest for additional allegations and also told the pharmacist how lucky he was that the Board did not turn his matter over to the local prosecutor. Thankfully, my client had the good sense not to tell the investigator anything or sign any statements.


These two experiences are unfortunately typical. Oftentimes the first time a pharmacist even learns that they are being scrutinized by the Board is when an investigator suddenly shows up at their home or place of employment demanding records and signed confessions. Duly intimidated by the Pharmacy Board’s strong-arm police tactics the licensee frequently signs a premade confession or discloses potentially damaging information without first consulting an attorney.


Make no mistake, despite any entreaties to the contrary the Board and its investigators are not your friends and they are not there to objectively assess the allegations to determine their merit; they are there to build the Board’s case against you and parse out info that can lead to additional allegations. I emphatically recommend that as soon as an investigator is at your door to politely decline talking with them or giving any statements and immediately contact an attorney with experience before the Texas State Board of Pharmacy. At that point your livelihood and reputation are plainly at stake. Do not try and go it alone and do not think you can “work things out” with the investigator.

Executive Director of Texas Medical Board Agrees to Overturn Revocations/Cancellations


Within the past three weeks my firm has represented two physicians whose licenses had been summarily revoked by the Texas Medical Board pursuant to alleged violations of their Agreed Orders. In both cases the Medical Board had failed to follow proper procedure and adhere to the terms of each physician’s Agreed Order prior to revoking their registrations.


The first case involved a physician on a long-standing monitoring order. The Automatic Revocation Order reneged his license on the stated bases that he had failed to continue timely payments with the Board’s drug testing company and he had submitted several “dilute negative” specimens. First and of most importance, this physician was never provided proper notice of the informal show compliance proceeding and accordingly never showed up at the hearing, directly resulting in the revocation. The notice of hearing had been sent to the physician’s old address despite the fact that he had previously filed the appropriate change of address form with his compliance officer.


Furthermore, the specific terms of his Agreed Order did not allow the Texas Medical Board to revoke his license for either late payments to the drug testing company or submitting dilute negative samples. In summary, not only did he not receive notice of the show compliance hearing, but the stated reasons for his revocation were illegal under his existing Board Order. Thankfully due to the quick intervention of my firm, the Executive Director of the Medical Board agreed to overturn the revocation and set the matter for a new show compliance proceeding. Unfortunately, my client had in the interim already lost his job and been subject to a public HIPDB report noting the revocation.


The second physician was revoked on the grounds that he had not kept up with his CME requirements. Again, this doctor was not given proper notice that the Medical Board was considering cancelling his registration until less than a month before the deadline date and moreover this was conveyed in an ambiguous letter discussing other matters. Understandably, the physician sent in a letter to the Board letting them know that he was presently enrolled in a Masters of Health Administration program and accordingly would be unable to complete the CME within such a short timeframe.


Apparently disregarding the letter, the Medical Board went ahead and cancelled his registration. The physician subsequently hired me and I was able to have the cancellation overturned through a letter to the Board’s Executive Director. The Board also agreed to give him additional time to complete the CME.


I think the experiences of these two clients demonstrate that timely intervention by counsel can make a huge difference and greatly mitigate the negative impact of an adverse Board action. Any physician facing a Board issue should seriously consider conferring with an experienced attorney so that they can head off such situations before they can harm their practice and reputation.     

Board of Nursing Intimidation of Nurses Through Formal Charges


The Texas Board of Nursing continues to use tactics which arguably violate and abuse the due process protections guaranteed Texas nurses under the Federal and Texas State Constitutions. The Board’s tactics can put your employment and reputation in jeopardy without any opportunity to defend yourself.


This abuse occurs through the Board’s filing of formal charges without the corresponding docketing of those charges at the State Office of Administrative Hearings, thereby preventing licensees from either clearing their name or achieving a final resolution. To illustrate how the BON is strong-arming nurses, we must understand how a complaint about a nurse works its way through the administrative system to a potential hearing. 


Complaints are submitted to the BON in writing and contain information about the nurse and of the pertinent facts or conduct. 22 Tex. Admin. Code § 213.13(a) (Tex. Bd. of Nursing, Complaint Investigation and Disposition). Not later than 30 days after a complaint is received, the BNE staff shall place a time line for completion, not to exceed one year (this is frequently ignored), in the investigative file and notify all parties of the complaint. 


If a complaint is not resolved informally, the staff at the Texas Board of Nursing may commence disciplinary proceedings by filing formal charges. 22 TAC 213.15(a). This is where the BON can strong-arm unsuspecting RNs, LVNs and other licensed nurses: the formal charge will show up on your record when a potential or current employer attempts to verify your nursing license online at the Board of Nursing website. Furthermore, your employer or potential employer can call the Board of Nursing to discuss the content of the formal charge, oftentimes resulting in the employer’s decision to terminate the nurse or not hire a job applicant.


At this juncture, the nurse is stuck in limbo. His or her license has the stigma of a formal charge attached to it, often injuring the nurse’s ability to retain or find employment. This is where the time line for completion, mentioned above, comes into play. The time line is said not to exceed one year, but the Board of Nursing, while you have this formal charge attached to your license, can continually extend the timeline by “3-12” months. This can go well over the one year timeline proscribed by the statute. The Leichter Law Firm represents numerous nurses who have been in this situation for years and are still receiving letters informing them that the timeline for the investigation into their case has been extended another “3-12” months, with no apparent end in sight and no solution to the formal charges attached to their license. 


How can this be resolved? Unfortunately, at present, the method for resolving such cases rests with the Texas Board of Nursing, and they have made no effort to reasonably settle these cases. The Texas Board of Nursing will often ask the nurse to simply sign an order agreeing to whatever punishment the Texas Board of Nursing deems appropriate. If the nurse refuses, the formal charges remain, and the case is supposed to move to an administrative hearing. But, the case cannot move from a formal charge to an administrative hearing unless the Texas Board of Nursing completes and files a Request to Docket Case form (and any other documents as required by statute) with the State Office of Administrative Hearings. For many licensees, the Texas Board of Nursing has simply not filed such a request.


Even a nurse who is represented by an attorney faces a tough situation in this scenario. In previous cases I have attempted to file discovery requests so that we could learn whether or not the Board can even prove up the case. In response, I always receive a curt letter from the Board stating that we have no present discovery rights as the case has not yet been docketed at SOAH. Thus the nurse remains in an arbitrary and bureaucratic nightmare where they are faced with formal charges and yet have no avenue to contest them until the Board deigns to set them at SOAH. The only possible recourse is file an action in District Court to try and compel the Board of Nursing to set the matters at SOAH, however, this is a costly and time-consuming process.


The real solution, of course, would be for the Board to change their policy and ensure that matters are docketed at SOAH within a reasonable time after the filing of formal charges. The Board has recently hired several new attorneys and this appears to have helped in the number of cases which are being set at SOAH. However, much room for improvement remains.

Department of Public Safety Arguably Denies Due Process


Recently, I have represented a pharmacist whose reapplication for his controlled substances registration was denied by the Texas Department of Public Safety when he voluntarily acknowledged that he had previously been convicted of a felony. He was one of several defendants on trial for the same set of criminal transactions and his own share of the guilt was slight. It was essentially a case of bad judgment and naivety on the part of my client. He had entered into a business relationship with the wrong people and was now paying for their misdeeds. The Federal Drug Enforcement Agency had essentially agreed and declined to take action against his controlled substances registration. In addition the Texas Pharmacy Board has so far chosen not to seek any disciplinary sanction.


In contrast, the Texas Department of Public Safety pursuant to the Texas Controlled Substances Act § 481.063(e)(2)(A) summarily denied his reapplication on the basis of his voluntary admission of his felony conviction. This section of the Health and Safety Code provides for such denial when an applicant has been convicted or placed on community supervision or probation for a felony. Fortunately, the Texas Legislature has also inserted into this chapter a provision allowing the Director of the DPS to probate a denial under § 481.063(e)(2)(A) upon a showing of good cause. The Act and the Department of Public Safety’s own administrative rules also generally allow an applicant to request a hearing wherein they may present evidence and argument in their favor.


As a hearing would almost certainly be necessary to present evidence establishing good cause for a probated order, I requested one as part of my client’s response to the DPS’s decision to deny his reapplication. In reply, the DPS sent a letter reiterating their denial and pointing to § 481.063(h). This Section holds that in the case of a denial based on a felony conviction, the provisions of the Texas Administrative Procedure Act do not apply. This is significant in that this bars access to the normal administrative process, most importantly, a licensee’s right to a full evidentiary hearing before an Administrative Law Judge.


As an attorney with extensive experience in this field, I must say that to my knowledge this is unique among Texas professional licensing law. A professional’s right to an administrative hearing following an initial decision by a licensing board is generally considered sacrosanct because of due process concerns. This is rightly so, as denial of a pharmacist’s controlled substances registration is a significant government taking, essentially the removal of a pharmacist’s ability to make a living. The Administrative Procedure Act’s hearing provisions are meant to safeguard the due process guarantees of the Texas and Federal Constitution.


The removal of APA protections in this case would be less troublesome if the DPS instead provided some adequate alternative. They could for instance, as is common among state and federal agencies, simply adopt rules providing for a hearing before a hearing examiner at the Board. They have not chosen to do so. When we sent in a remedial packet of documents outlining his limited culpability for the underlying offense, the DPS sent a terse response that they remained firm in their decision and were still not going to allow my client a hearing.


This is all the more strange given that one would think it impossible to make an informed decision as to whether good cause is applicable in a specific case unless the subject party and their attorney are given an opportunity to argue this point. As is, the current state of the Texas Controlled Substances Act and DPS practice places unlimited and unchallengeable discretion with the DPS Director as to whether or not grant a probated order. This is a clear denial of due process as a licensee is given no meaningful opportunity to contest the DPS’s findings.


What is more, given the current state of the law it is not clear whether a pharmacist denied under § 481.063(e)(2)(A) has any opportunity for judicial review either. It is basic Texas law that a party may not judicially appeal an adverse administration decision without first submitting the administrative record in evidence. As it stands there is no administrative record; no findings of fact or findings of law, nor any testimony or set of evidentiary documents. Even if the handful of short letters between the DPS and my client were found to be a sufficient administrative record, it is unclear as to what the reviewing court could use as a basis for its holding. There is simply no record that can serve as the basis for a meaningful review of the Department of Public Safety’s decision.


The DPS needs to either provide an adequate alternative hearing procedure or ask the state legislature to bring § 481.063(e)(2)(A) back within the purview of the APA. If they don’t, one can only hope that the legislature decides to fill this legal loophole on their own initiative.

AAPS Files Federal Lawsuit Against the Texas Medical Board

In late December of last year, the Association of American Physicians and Surgeons filed a federal lawsuit against the Texas Medical Board seeking various injunctive and declaratory relief against what it characterizes as the abusive practices of the Board. The AAPS complaint contains numerous allegations running the gamut from Board manipulation of the anonymous complaint process, a conflict of interest by the former head of the disciplinary committee, an ongoing policy of arbitrarily rejecting the recommendations of Administrative Law Judges, breaches of confidentiality during the disciplinary review process, and Board retaliation against physician criticism. 

In a press release, Executive Director of the AAPS, Jane M. Orient stated that the AAPS felt compelled to file the lawsuit on behalf of its Texas members given that individual physicians were too afraid of possible TMB retaliation to take action on their own. The AAPS identifies itself as a non-profit entity with thousands of members throughout the country, including Texas, dedicated to preserving the traditional doctor-patient relationship and effective medicine. One of the organization’s overriding purposes is identified in their complaint as the protection of its members “from arbitrary and unlawful government action” such as that alleged to have been perpetrated by the TMB.

A central allegation of the complaint claims that Texas Medical Board President Roberta Kalafut actively manipulated the anonymous complaint process to harass and discipline physicians, including some of her Abilene competitors. According to the pleadings, Mrs. Kalafut had her husband file the anonymous complaints which she then ensured were actively pursued by the Board. Mrs. Kalafut has responded to the press by stating that this claim is completely untrue, noting that none of the anonymous complaints which led to disciplinary action came from Abilene. The AAPS complaint also targets outside abuse of the anonymous complaint process. It alleges that a New York insurance company arranged to have an anonymous complaint filed against a Texas doctor who had treated five of its insured members, who were all pleased with their treatment, so as to avoid paying their costs. The suit seeks an injunction against future receipt of anonymous complaints and a declaratory judgment that such complaints violate a physician’s due process rights under color of state law.

The second main allegation involves Keith Miller’s tenure as Chairman of the TMB’s Disciplinary Process Review Committee, a topic I have previously blogged about. Mr. Miller resigned in the fall of last year amid criticism of his continued position as disciplinary chairman while he simultaneously served as a plaintiff’s expert witness in scores of medical malpractice cases throughout Texas. The complaint points out this conflict of interest and Board officials’, such as President Kalafut, admitted awareness of it as reason for the federal court to compel the reopening of the disciplinary cases heard by Miller.

The final primary allegation of the AAPS involves the TMB’s arbitrary rejection of negative administrative rulings. The complaint itself points out a case where the TMB sought a disciplinary sanction against a doctor’s license who had requested, as per his hospital’s standard rate, that a patient pay $81 dollars for a copy of her medical records. In response to the patient’s complaint the Board’s disciplinary committee, headed by Keith Miller, demanded that the doctor pay a $1000 fine as part of a sanction that would be reported to the National Practitioner’s Databank. After the doctor appealed the case and an Administrative Law Judge ruled unequivocally that the TMB had no legal authority on which to take such an action, the Board simply reinstated its findings and doubled the fine. The suit seeks an injunction against any further arbitrary rejections of administrative rulings by the TMB and a declaratory judgment that such rejections violate both due process and equal protection.

Finally, as additional matters the complaint alleges that physician’s inability to speak out against the TMB and its policies for fear of retaliation, amounts to a denial of free speech. In support of this claim, the complaint points to several instances where Board members have allegedly publicly defamed doctors critical of the TMB. The suit also attacks the Board for allegedly giving confidential records regarding a physician to a hospital with which the doctor was involved in a private dispute.

In response, the TMB has stated that all of the AAPS claims are baseless. Specifically in regards to anonymous complaints, the TMB’s general counsel, Robert Simpson has noted that of the over 10,000 complaints received by the Board in the past two years, only 10 anonymous complaints have resulted in a “disciplinary measure” against a physician’s license / registration. Furthermore, only four percent of the complaint total is made anonymously. TMB officials also point out that the statute authorizing the use of anonymous complaints is designed to protect whistleblowers and thus better protect Texans from bad doctors. Any recent increase in disciplinary actions based on anonymous complaints is also probably at least partially explainable as part and parcel of the 39 percent overall increase in complaints received since the law was amended in 2003 to better catch bad doctors.  

The AAPS’s suit raises serious allegations regarding contemporary disciplinary practices at the Texas Medical Board and it will be interesting to see how this will play out in federal court. If nothing else, this heated dispute between a national physician’s organization and the TMB indicates the importance of retaining an experienced professional licensing attorney whenever a doctor is entangled in the Board's  disciplinary process.