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.