HBA-JRA C.S.H.B. 2315 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 2315 By: Maxey Public Health 4/12/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Texas spent nearly $5 billion on health care in fiscal 1997, including $3.8 billion in state and federal funds on Medicaid acute care, $27 million on medical workers' compensation claims for state employees, and $856 million on health insurance. The 75th Texas Legislature requested that the comptroller of public accounts study the size and nature of fraud and overpayments in state health care programs. The comptroller's fraud measurement study, completed in fall 1998, examined likely overpayments and fraud in Medicaid acute care, medical workers' compensation for state employees, and health insurance for state employees during fiscal 1997. The study concluded that Texas may have overspent in these areas by more than $300 million. C.S.H.B. 2315 implements procedures to upgrade the detection and prevention of health related fraud and overpayments in state agencies. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the risk management board of the State Office of Risk Management in SECTION 1.01 (Section 412.064, Labor Code), and the Health and Human Services Commission in SECTION 2.03 (Section 531.102, Government Code) and SECTION 2.04 (Section 531.110, Government Code) of this bill. SECTION BY SECTION ANALYSIS ARTICLE 1. POWERS AND DUTIES OF THE STATE OFFICE OF RISK MANAGEMENT SECTION 1.01. Amends Chapter 412, Labor Code, by adding Subchapter G, as follows: SUBCHAPTER G. FRAUD INVESTIGATION AND PREVENTION REGARDING MEDICAL BENEFITS Sec. 412.061. DEFINITIONS. Defines "fraudulent act" and "program" in this subchapter. Sec. 412.062. CLAIM REVIEW BY OFFICE. Requires the State Office of Risk Management (office) to conduct periodic reviews of claims for medical benefits as necessary to determine the medical necessity and appropriateness of the provided services. Requires the office to conduct a claim review on each claim that involves the receipt of psychiatric services or in which the use of prescription drugs appears inappropriate. Authorizes the office to withhold payments to be made to a health care provider who does not provide documentation requested by the office necessary to verify a medical service related to a claim in the manner prescribed by the risk management board (board). Sec. 412.063. CLAIMS AUDIT. Requires the director of the office (director) to conduct an annual audit of claims for medical benefits as provided by this section. Requires the director to randomly select and audit to determine the validity of a statistically significant sample of claims submitted under the workers' compensation program (program). Requires the director, in performing the audit, to interview the claimant to ensure that the appropriate health care services were received. Provides that the audit must include a review of the claimant's medical history and medical records. Authorizes the director to contract with a private entity for performance of the audit. Sec. 412.064. PREPAYMENT AUDIT. Requires the board, by rule, to require each person who processes claims for the office to implement a prepayment audit procedure that compares the diagnosis code submitted on the bill for health care services to the code for the injured body part and verifies the appropriateness of the diagnosis code for the health care services provided. Sec. 412.065. TOLL-FREE TELEPHONE NUMBER. Requires the office to maintain a toll-free telephone number for complaints of alleged insurance fraud by participants of the program or health care providers. Requires the director to provide claimants with information regarding the telephone number in a manner determined appropriate by the office. Sec. 412.066. TRAINING CLASSES IN FRAUD PREVENTION. Requires the director to implement annual training classes for appropriate members of the staff of state agencies and contractors or administering firms who process workers' compensation claims submitted under the program for medical benefits to assist them in identifying potential misrepresentation or fraud in the operation of the program. Authorizes the director to contract with HHS or with a private entity for the operation of the training classes. Sec. 412.067. ACTION BY OFFICE; COOPERATION REQUIRED. (a) Requires the office to take action against the provider if the office determines that a health care provider has obtained fraudulent payments under the program. Requires the office to report any action taken in writing to the Texas Workers' Compensation Commission (commission). (b) Requires each state agency and health care provider who participates in the program, as a condition of that participation, to cooperate fully in any investigation of an alleged fraudulent act that is conducted by the director, including providing to the director timely access to patient medical records determined by the director necessary to conduct the investigation. (c) Entitles the director to access to patient medical records for the limited purpose of this subsection, notwithstanding any other law regarding the confidentiality of patient records, and establishes that the director is a "governmental agency" for purposes of Section 5.08, Article 4495b (Medical Practice Act), V.T.C.S. Establishes that a medical record submitted to the director under this subsection is confidential and is not subject to disclosure under Chapter 552 (Public Information), Government Code. Sec. 412.068. FRAUDULENT ACTS BY PROVIDERS. (a) Requires the director to investigate each complaint alleging fraud made by a claimant, health care provider, or state agency regarding a health care provider or claimant who is participating in the program. (b) Requires the director to terminate the investigation if the director determines that the complaint is unfounded after initial investigation. Requires the director, if further action is warranted, to refer the complaint to the commission for appropriate sanctions or administrative action and provide the commission and the Health and Human Services Commission with information regarding the complaint. (c) Requires the commission to promptly initiate administrative proceedings or criminal prosecution on each complaint referred by the director and, on finding fraud or overpayment, to requires restitution to the office in addition to any other penalty assessed or action taken. Sec. 412.069. REPORTS. Requires the commission to report to the legislature at the beginning of each regular legislative session the number of referrals received from the office during the biennium, the number of prosecutions completed on such referrals, and the total restitution ordered to the office on successful prosecutions. Requires the offices to report to the legislature at the beginning of each regular legislative session the number of referrals made to the commission during the biennium, the total amount of the fraud or overpayment alleged in the cases referred, and the total amount collected from restitution orders entered after prosecution by the commission. Sec. 412.070. ADMINISTRATIVE PENALTY. (a) Authorizes the board to impose an administrative penalty on a health care provider or claimant who commits fraud in obtaining a payment or a medical benefit under Chapter 501 (Workers' Compensation Insurance Coverage for State Employees, including Employees under the Direction or Control of the Board of Regents of Texas Tech University), Labor Code. (b) Prohibits the amount of the penalty from exceeding $10,000 and establishes that each day a violation continues or occurs is a separate violation for the purposes of imposing a penalty. Requires the penalty amount to be based on the seriousness of the violation, the history of previous violations, the amount necessary to deter a future violation, efforts to correct the violation, and any other matter that justice may require. (c) Authorizes the enforcement of the penalty to be stayed while the order is under judicial review if the person pays the penalty to the clerk of the court or files a supersedeas bond with the court in the amount of the penalty. Authorizes a person who cannot afford to pay the penalty or file the bond to stay the enforcement by filing an affidavit in the manner required by the Texas Rules of Civil Procedure. (d) Authorizes the attorney general to sue to collect the penalty. (e) Requires an administrative penalty collected under this section to be transferred by the office to the comptroller for deposit in the general revenue fund. Requires the comptroller to deposit up to $200,000 per state fiscal biennium in the state workers' compensation account in the general revenue fund to be used for the detection and prosecution of fraud under this subchapter. (f) Establishes that a proceeding to impose the penalty is considered to be a contested case under Chapter 2001 (Administrative Procedure), Government Code. SECTION 2.01. Amends Section 501.0431, Labor Code, as follows: Sec. 501.0431. New title: DIRECTOR'S DUTIES RELATING TO FRAUD. Requires the director to maintain and regularly update a list of the names and telephone numbers of all persons entitled to medical benefits under this chapter (Workers' Compensation Insurance Coverage For State Employees, Including Employees Under The Direction or Control of The Board of Regents of Texas Tech University) to be used to confirm the delivery to each person of services for which medical benefits are provided. ARTICLE 2. POWERS AND DUTIES OF THE TEXAS DEPARTMENT OF HUMAN SERVICES AND THE HEALTH AND HUMAN SERVICES COMMISSION SECTION 2.01. Amends Subchapter B, Chapter 32, Human Resources Code, by adding Sections 32.0242 and 32.0243, as follows: Sec. 32.0242. VERIFICATION OF CERTAIN INFORMATION. Requires the Health and Human Services Commission (HHS) to verify an applicant's physical residential address on determination that the applicant is eligible for medical assistance. Sec. 32.0243. PERIODIC REVIEW OF ELIGIBILITY FOR CERTAIN RECIPIENTS. Requires HHS, in cooperation with the United States Social Security Administration, to periodically review the eligibility of a recipient of medical assistance benefits who is eligible on the basis of the recipient's eligibility for Supplemental Security Income (SSI) benefits. Requires HHS, in reviewing the eligibility of a recipient, to ensure that only recipients who reside in this state and who continue to be eligible for SSI benefits remain eligible for medical assistance. SECTION 2.02. Amends Section 403.026, Government Code, as added by Chapter 1153, Acts of the 75th Legislature, Regular Session, 1997, by redesignating it to Section 403.028 and amending it as follows: Sec. 403.028. HEALTH CARE FRAUD STUDY. (a) Requires the comptroller to conduct a study each biennium to determine the number and type of potentially fraudulent claims for medical assistance or health care benefits submitted under the state Medicaid program, including the Medicaid managed care program implemented under Chapter 533 (Implementation of Medicaid Managed Care Program), and the need for changes to the recipient eligibility system used under the state Medicaid program. Redesignates existing Subdivisions (1)-(3) to Paragraphs (A)-(C). (b) Authorizes the comptroller or, at the request of the comptroller, a state agency that administers a program identified by Subsection (a) to make telephone contact with a person identified as receiving services for which benefits are provided under the program to confirm the delivery of services to the person, for purposes of the study under this section. (c) Provides that the information the state agency provides the comptroller must be in the format required by the comptroller to permit examination of both patient and health care provider histories to identify unusual or suspicious claims or patterns of claims. (d) Requires each state agency that administers a program identified by Subsection (a), in consultation with the comptroller, to establish performance measures to be used to evaluate the agency's fraud control procedures. (e) Provides that the comptroller's report of the results of the study to each state agency must indicate whether the level of fraud in each program included in the study has increased, decreased, or remained constant since the last report. Redesignated from existing Subsection (c). SECTION 2.03. Amends Section 531.102, Government Code, by adding Subsections (e), (f), (g), as follows: (e) Requires HHS to assign the highest priority for investigation of potential fraud to suspects identified by the learning or neural network technology required under Section 431.106 and claims submitted for reimbursement for outpatient hospital, ancillary, emergency room, and home health care services. (f) Requires HHS, by rule, to set specific claims criteria that, when met, require the office to begin an investigation. Provides that the claims criteria must be based on a total dollar amount or a total number of claims submitted for services to a particular recipient during a specified amount of time that indicates a high potential for fraud. (g) Requires HHS to ensure that each health and human services agency that administers a part of the Medicaid program maintains and regularly updates a list of the names and telephone numbers of all Medicaid recipients to be used to confirm the delivery to each recipient of services for which benefits are received. SECTION 2.04. Amends Subchapter C, Chapter 531, Government Code, by adding Section 531.109, 531.110, and 531.111, as follows: Sec. 531.109. SELECTION AND REVIEW OF CLAIMS. Requires HHS to randomly select and review a statistically significant sample of claims for reimbursement under the state Medicaid program, including the vendor drug program, for potential cases of fraud, waste or abuse on an annual basis. Requires HHS, in performing the review, to directly contact the recipient to verify that the services for which a claim for reimbursement was submitted were received. Requires HHS to determine the types of claims at which HHS resources for fraud, waste, and abuse detection should be primarily directed based on the results of the annual review. Sec. 531.110. ELECTRONIC DATA MATCHING PROGRAM. (a) Requires HHS to conduct electronic data matches for a recipient of assistance under the state Medicaid program at least quarterly to verify the identity, income, employment status, and other factors that affect the eligibility of the recipient. (b) Provides that the electronic data matching must match information provided by the recipient with information contained in certain databases in order to verify eligibility. (c) Requires the Texas Department of Human Services to cooperate with HHS by providing data or any other assistance necessary to conduct the required electronic data matches. (d) Authorizes HHS to contract with a public or private entity to conduct the electronic data matches. (e) Requires HHS, by rule, to establish procedures to verify the electronic data matches. Requires the Texas Department of Human Services to remove from eligibility a recipient who is determined ineligible by the 20th day after the electronic data match is verified. (f) Requires HHS to report biennially to the legislature the results of the electronic data matching program. Provides that the report must include a summary of the number of applicants who were removed from eligibility as a result of an electronic data match conducted under this section. Sec. 531.111. FRAUD DETECTION TECHNOLOGY. Requires HHS to leverage the use of fraud detection technology specified under Section 531.106 (Learning or Neural Network Technology) and authorizes HHS to contract with a contractor who specializes in developing technology capable of identifying patterns of fraud exhibited by Medicaid recipients to develop and implement the fraud detection technology and determine if a pattern of fraud by Medicaid recipients is present in the recipients' eligibility files maintained by the Texas Department of Human Services. ARTICLE 3. TRANSITION SECTION 3.01. Requires the State Office of Risk Management (office) to implement the toll-free telephone number required under Section 412.065, Labor Code, as added by this Act, by January 1, 2000. SECTION 3.02. Requires the office to implement the training classes required under Section 412.066, Labor Code, as added by this Act, by January 1, 2000. SECTION 3.03. Requires the risk management board of the office (board) to conduct a study regarding the use of fraud detection software, which may include an analysis of the fraud detection software used by HHS for the detection of fraud in the Medicaid program. Requires the board to report the results of its study to the 77th Legislature by February 1, 2001. SECTION 3.04. Requires HHS, in cooperation with the office of inspector general of the Texas Department of Human Services, to study and consider for implementation fraud detection technology. SECTION 3.05. Requires the Texas Department of Health (TDH), by December 31, 2000, to contract with a contractor who specializes in Medicaid claims payment systems to perform tests on the Medicaid claims payment system to ensure the smooth and timely payment of claims, ensure accuracy of claims payments, and reveal inconsistencies in the payment system. Provides that the contract must require the contractor to perform independent tests on any replacements for or enhancements to the payment system for which federal funds for enhancement have been requested before they are implemented. SECTION 3.06. (a) Requires the Texas Department of Human Services (department) to develop a Medicaid eligibility confirmation letter that is not easily duplicated by January 1, 2000, and to begin using that confirmation letter in place of the letter used on the effective date of this Act. Provides that the new confirmation letter must be used until a permanent system for eligibility confirmation is implemented as required by this Act. (b) Requires the department to identify and consider for implementation alternative methods for a recipient to prove eligibility under the state Medicaid program to a provider on the effective date of this Act. Requires the department to consider the methods used by other states. (c) Requires the department to implement a permanent system for a recipient to prove eligibility under the state Medicaid program to a provider that is designed to reduce the potential for fraudulent claims of eligibility by September 1, 2000. SECTION 3.11. Requires a state agency affected by any provision of this Act, if the agency determines that a waiver or authorization from a federal agency is necessary for implementation of that provision, to request the waiver or authorization and authorizes that agency to delay implementation until the waiver or authorization is granted. SECTION 3.12. Makes application of this Act prospective regarding an administrative penalty. ARTICLE 4. EFFECTIVE DATE; EMERGENCY SECTION 4.01. Effective date: September 1, 1999. SECTION 4.02. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute modifies the original by deleting proposed ARTICLES 1-3. Proposed ARTICLE 1 amended Article 3.50-2 (Texas Employees Uniform Group Insurance Benefits Act), Insurance Code, by amending Section 4B and adding Sections 4D, 4E, 4F, and 4G. The original amended Section 4B to require the executive director of the Employees Retirement System of Texas (executive director) to take action against a health care provider that obtained fraudulent payments under any program provided under the authority of this Act and to implement fraud detection training classes and to require participating carriers and health care providers to cooperate in any investigation of insurance fraud. Section 4D required the executive director to investigate each complaint alleging fraud regarding a participating health care provider and set forth possible sanctions and administrative actions. Section 4E required the executive director to conduct a quarterly audit of health care claims and set forth procedures to do so. Section 4F required the Board of Trustees of the Employees Retirement System of Texas (trustee) and the commissioner of insurance (commissioner), by rule, to adopt guidelines and priorities for referring cases of alleged fraudulent insurance acts by participating health care providers and to keep certain records on each referred case. Section 4G provided administrative penalties for a participant or health care provider who commits fraud under this Act. Proposed ARTICLE 1 also amended Section 815.510, Government Code, to require the annual report required of the Employees Retirement System of Texas to include an update on the activities to combat insurance fraud against the state employees health benefits program (program). Proposed ARTICLE 2 amended Chapter 1, Insurance Code, by adding Article 1.64, which provided administrative penalties for a health care provider who commits insurance fraud against the program. Proposed ARTICLE 3 amended Chapter 1, Insurance Code, by adding Article 1.65, which authorized a person to bring a civil action for insurance fraud in violation of Section 4B, Article 3.50-2, Insurance Code, for the person and for the state. The article set forth procedures for initiating such an action, rights of the parties if the state did or did not intervene, procedures for stays of discovery, alternate remedies, and awards. The substitute modifies the original by redesignating proposed ARTICLE 4 to ARTICLE 1 (Chapter 412, Labor Code), and as follows: In proposed Section 412.061, the substitute changes the definition of "fraudulent act." In proposed Sections 412.065 and 412.067, the substitute replaces references to "fraud" with "alleged fraud" in regard to acts that have not yet been determined as fraudulent. In proposed Section 412.068, the substitute requires the director of the State Office of Risk Management (office) to investigate each complaint alleging fraud made by a claimant, health care provider, or state agency regarding a claimant, as well as health care provider, who is participating in the workers' compensation program. The substitute requires the director to refer a complaint to the Texas Workers' Compensation Commission (commission), rather than the risk management board, for appropriate sanctions or administrative action and to provide the Health and Human Services Commission with information regarding the complaint. The substitute deletes the proposed Subsection (c), which set forth possible sanctions against a health care provider, and adds a new Subsection (c), which sets forth the information the commission and the office are required to report to the legislature. The substitute adds a new Section 412.069 to require the commission and the office to report to the legislature certain information relating to the progress of fraud restitution. The substitute redesignates proposed Section 412.069 to Section 412.070. The substitute adds a new SECTION 1.02, which amends Section 501.0431, Labor Code, to require the director to maintain and regularly update a list of the names and telephone numbers of all persons entitled to medical benefits under this chapter (Workers' Compensation Insurance Coverage For State Employees, Including Employees Under The Direction or Control of The Board of Regents of Texas Tech University) to be used to confirm the delivery to each person of services for which medical benefits are provided. The substitute modifies the original by redesignating ARTICLE 5 to ARTICLE 2 and as follows: In SECTION 2.01, the substitute deletes proposed Section 32.0242(b), Human Resources Code. In SECTION 2.02, the substitute redesignates Section 403.026 to Section 403.028, Human Resources Code, and requires the comptroller to conduct a study each biennium to determine the number and type of potentially fraudulent claims for medical assistance or health care benefits submitted under the state Medicaid program, including the Medicaid managed care program implemented under Chapter 533 (Implementation of Medicaid Managed Care Program). The substitute also adds a new Subsection (b) and amends existing Subsections (c)-(e), which set forth the responsibilities of the comptroller and state agencies in conducting the study. In proposed Section 531.102, Government Code, the substitute requires HHS to assign the highest priority for investigation of potential fraud to suspects identified by the learning or neural network technology required under Section 531.106, as well as claims submitted for reimbursement for outpatient hospital, ancillary, emergency room, and home health care services. The substitute adds a new Subsection (g), to require HHS to ensure that each health and human services agency that administers a part of the Medicaid program maintains and regularly updates a list of the names and telephone numbers of all Medicaid recipients to be used to confirm the delivery to each recipient of services for which benefits are received. In proposed Section 531.09, Government Code, the substitute includes waste detection among the areas at which HHS should direct its resources. In proposed Section 531.111, Government Code, the substitute requires HHS to leverage the use of fraud detection technology specified under Section 531.106 (Learning or Neural Network Technology). The substitute modifies the original by redesignating ARTICLE 6 to ARTICLE 3, by deleting proposed SECTIONS 6.01-6.04 and 6.13, which provided effective dates for the actions required by proposed ARTICLES 1-3, and by amending SECTION 3.05 to require the Texas Department of Health to contract with a contractor who specializes in Medicaid claims payment systems to perform tests on any replacements for or enhancements to the payment system for which federal funds for enhancement have been requested before they are implemented, rather than requiring testing before initial implementation and before implementation of any change to the operation of the system. The substitute redesignates proposed SECTIONS 6.05-6.12 to SECTIONS 3.01-3.08. The substitute modifies the original by redesignating ARTICLE 7 to ARTICLE 4 and SECTIONS 7.01 and 7.02 to 4.01 and 4.02.