Medicaid Fraud Unit. Program Background. Patient Abuse and Neglect

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1 Medicaid Fraud Unit Program Background Medicaid Fraud Units ( Units or MFUs ) are federal and state funded law enforcement entities that investigate and prosecute Medicaid provider fraud and violations of state laws pertaining to fraud in the administration of the Medicaid program. In addition, the Units are required to review complaints of patient abuse or neglect in all residential health care facilities that receive Medicaid funds. The Units are staffed by attorneys, investigators, auditors, and in Oregon, a nurse investigator, trained in complex health care fraud litigation. The Units are required to be separate and distinct from the state Medicaid programs and are usually located in the state Attorney General s office, although seven of the 50 Units are located in other state agencies. The Units were established in 1977 by P.L , the Medicare/Medicaid Anti-Fraud and Abuse Amendments. Initially, the Units were funded with 90 percent federal funding for three years. Permanent federal funding, at a rate of 90 percent for the first three years of a Unit s operation and 75 percent thereafter, was enacted into law as part of the Omnibus Reconciliation Act of 1980, P.L Until 1995, a state was not required to have an MFU. According to federal law, a state must now demonstrate that it operates an MFU or must submit a waiver to the Secretary of the U.S. Department of Health and Human Services. Currently there are 50 MFUs operating in 49 states and the District of Columbia. Only North Dakota does not have a MFU. In FY 2009, the Oregon MFU recovered over $20 million in court ordered restitution, fines and penalties and during this same period obtained a total of 27 criminal convictions. While MFUs operate as an entity of state government, the HHS Office of Inspector General has administrative oversight responsibility for this grant program and recertifies the Units annually to ensure that they comply with federal regulations. Patient Abuse and Neglect While the primary mission of the MFUs is to investigate and prosecute complex fraud schemes and the Units have proven to be extremely successful at obtaining thousands of convictions and recovering millions of dollars in Medicaid overpayments over the past 25 years equally important is the MFUs responsibility to review and prosecute complaints of patient abuse and neglect. The MFUs have criminally prosecuted thousands of different types of patient abuse cases which can be classified into several categories and include physical, financial and emotional abuse. Recently, many of the Units are vigorously pursuing quality of care cases in long-term care facilities. For some time the MFUs have urged the strengthening of state and federal patient abuse laws and regulations that have a direct impact on the health and wellbeing of the sick and frail

2 elderly. In 1988, the National Association of Medicaid Fraud Control Units, in cooperation with the National Association of Attorneys General, published Guidelines and Commentary for Legislation to Prohibit Patient and Resident Abuse. These guidelines have been used by many states when drafting or amending patient abuse statutes. The MFUs have been active in developing and offering comprehensive training programs and conferences to educate other law enforcement, health care givers, long-term care ombudsman and other state agencies. Extended Jurisdiction Congress recognized the success of the Units in deterring health care fraud, in identifying program savings, in ridding the health care system of corrupt practitioners, and in preventing physical and financial abuse in health care facilities, by extending the jurisdiction of the Units in Section 407 of P.L , the Ticket to Work and Work Incentives Improvement Act of 1999, allows the Units, with the approval of the Inspector General of the relevant agency, to investigate fraud in other federally-funded health care programs, if the case is primarily related to Medicaid. This section also authorizes the Units, on an optional basis, to investigate and prosecute resident abuse or neglect in non-medicaid board and care facilities. Global Settlements The MFUs have worked collaboratively with the federal government in regional and national investigations, prosecutions and settlements. At the national level, the MFUs are generally notified by U.S. Department of Justice about a federal Medicare investigation and prosecution. The federal government and defense attorneys recognize that the states must be included in these cases because it would be unable to settle the Medicaid portion without them. Settling with one state Medicaid program does not solve Medicaid claims in other states. Most states, like the federal government, lack the authority to exclude a convicted provider from their health care program. Settlement of these cases would be virtually impossible if defense attorneys had to obtain settlement agreements from individual states and had to negotiate separate terms with each state. The MFUs, since 1992, have returned billions of dollars to the state Medicaid programs, and will continue to return additional monies to these programs

3 Medicaid Fraud Unit Frequently Asked Questions About the Medicaid Fraud Unit 1. What is a Medicaid Fraud Unit? A Medicaid Fraud Unit ( Unit or MFU ) is a single identifiable entity of state government, annually certified by the Secretary of the U.S. Department of Health and Human Services. The Unit has either statewide criminal prosecution authority or formal procedures for referring cases to local prosecutorial authorities with respect to the detection, investigation and prosecution of suspected criminal violations of the Medicaid program. See 42 U.S.C. 1396b(q). There are 50 state MFUs. Forty-three are currently located in the office of the state Attorney General. Connecticut, Washington, D.C., Georgia, Illinois, Iowa, Tennessee and West Virginia have Units which are in other departments of state government. North Dakota has received a waiver from the federal government and does not have a Unit. 2. Must each state have a MFU? Under federal law, each state must have a Unit unless the state demonstrates to the satisfaction of the Secretary of the Department of Health and Human Services that a Unit would not be cost effective because minimal fraud exists in the state s Medicaid program and Medicaid beneficiaries will be protected from abuse and neglect. 3. What is the jurisdiction of a MFU? A Unit s function is to conduct a statewide program for the investigation and prosecution of health care providers who defraud the Medicaid program. In addition, a Unit reviews complaints of abuse or neglect against patients in health care facilities receiving Medicaid funding and may review complaints of the theft of patients private funds in these facilities. The Unit is also charged with investigating fraud in the administration of the program. The Ticket to Work and Work Incentives Improvement Act of 1999 authorizes the Units, with the approval of the Inspector General of the relevant agency, to investigate fraud in other federally-funded health care programs, if the case is primarily related to Medicaid. This section also authorizes the Units, on an optional basis, to investigate and prosecute resident abuse or neglect in non- Medicaid board and care facilities.

4 4. How are MFUs funded? MFUs receive annual grants (Federal Financial Participation or FFP ) from the U.S. Department of Health and Human Services. Grant amounts must be matched with state funding. Initially, a Unit receives federal funding at a 90 percent level. After its first three years, the FFP is reduced to 75 percent. 5. What are the limitations on federal financial participation? Federal financial participation is authorized for full-time attorneys, investigators and auditors involved in the investigation and prosecution of matters within the jurisdiction of a Unit. Full-time employees are required to be hired to perform full-time duty intended to last at least a year. Federal grant money may also be used for part-time support staff but only to the extent that these part-time employees participate in work activities that further the jurisdictional duties of the Unit. Finally, FFP is available to the Unit s parent agency to cover all indirect costs associated with the operation of the Unit. 6. What are MFU minimal staffing levels? A Unit is intended to operate using a strike force concept of investigators, auditors and attorneys working together full-time to develop Medicaid fraud investigations and prosecutions. The staff of the Unit must include attorneys experienced in the investigation and prosecution of civil fraud or criminal cases, auditors capable of reviewing financial records, and investigators with substantial experience in commercial or financial investigations. If a Unit lacks direct prosecutorial authority, it must have a formalized procedure in place for referring cases to the appropriate prosecutorial authority. In Oregon, the MFU does have independent prosecutorial authority but usually is specially deputized by the local elected district attorney to prosecute a case in the particular county. 7. What is the extent of federal oversight over a MFU? Each Unit operates under the administrative oversight of the Inspector General of the U.S. Department of Health and Human Services and must be recertified annually. As part of the recertification process, the Inspector General reviews a Unit s application for recertification and conducts on-site visits. Additionally, Units submit quarterly and annual reports to the Inspector General. These reports include statistical data on the number and type of cases under investigation, the number of convictions obtained and the number of dollar recoveries to the Medicaid program. The day-to-day supervision of a Unit rests with the parent agency.

5 8. How do Medicaid fraud cases typically arise? While specifics may vary from state to state, a primary source of referrals is the agency responsible for auditing and reviewing Medicaid provider claims. Other significant sources of referrals are the MFUs in other states as well as other law enforcement agencies. The Oregon MFU is known to have a particularly good working relationship with the Department of Human Services and as a result, receives many referrals from that agency. Generally, the Oregon MFU receives about 300 referrals a year. 9. How do the multi-state/federal global settlements arise and how are they handled? Medicaid fraud global settlements generally arise in connection with a U.S. Department of Justice investigation against a Medicare provider. When resolving these Medicare cases, the federal government, often at the request of defense counsel, turns to the state MFUs because it cannot settle the Medicaid portion of the case without the Units. Moreover, defense attorneys are unlikely to settle the case without the affected states because each state has the authority to exclude a convicted provider from its health care programs. The Department of Justice typically contacts the National Association of Medicaid Fraud Control Units about a potential settlement, and the President of the Association appoints a settlement team which usually consists of three to four members. All recoveries and negotiations are based upon a state s actual damages, calculated by analyzing the provider s billings. The Medicare cases are often filed as qui tam or whistleblower actions that are under seal. The seal is partially lifted to give the Units the opportunity to gather provider specific information in their states to give to the NAMFCU negotiating team. 10. What federal consequences follow a felony conviction for Medicaid fraud? Under federal regulations, providers who are convicted of a program related offense are excluded for a minimum of five years from receiving funds from any federally funded health care program, either as a health care provider or employee. Often, this sanction has a greater impact on the convicted individual and the provider community at large than the criminal penalties assessed in the case. 11. What is the National Association of Medicaid Fraud Control Units (NAMFCU)? The National Association of Medicaid Fraud Control Units (NAMFCU) was founded in 1978 to provide a forum for a nationwide sharing of information concerning the problems of Medicaid fraud, to improve the quality of Medicaid prosecutions by conducting training programs, to provide technical assistance to Association members and to provide the public with information about the MFU program. All 50 MFUs are members of the Association. NAMFCU is headquartered in Washington, D.C. and is staffed by a Counsel and a Paralegal