OIG Releases Report on Medicaid Fraud Control Units

11 March 2014 Health Care Law Today Blog

The Department of Health and Human Services (HHS) Office of Inspector General (HHS-OIG) has released its Fiscal Year (FY) 2013 Annual Report (Report) on the performance of the Medicaid Fraud Control Units (MFCU) (OEI-06-13-00340, March 2014). As part of their state Medicaid plans, all states must operate a MFCU or convince HHS that it is not cost-effective to do so and that other fraud protections are in place. In FY 2013, 49 states and the District of Columbia had MFCUs. The MFCUs investigate allegations of fraud as well as allegations of patient abuse and neglect. HHS-OIG oversees the MFCUs and administers grants that provide federal funding for MFCU operations. Federal funding reimburses 75% of operating costs, while the remainder is contributed by the states.

The Report credits the MFCUs with 1,341 convictions in FY 2013, mostly relating to fraud matters. In addition, there were a reported 879 civil settlements. Recoveries from the convictions totaled nearly $1 billion, while recoveries from the civil cases totaled more than $1.5 billion. Of note is that 7% of the criminal convictions involved physicians. The largest monetary criminal recovery (in fact, the largest State MFCU criminal recovery in U.S. history) came from a joint state-federal investigation of a pharmaceutical manufacturer, which admitted liability for unlawful promotion of a prescription drug for uses not approved by the Food and Drug Administration. That manufacturer also entered into a civil settlement to resolve allegations of illegal marketing, false and misleading statements about safety, efficacy, dosing and cost-effectiveness, and illegal remunerations paid to health care professionals and long term care pharmacy providers. The MFCUs also participated in a global civil settlement involving another pharmaceutical manufacturer with respect to allegations that it marketed one drug for uses not approved by the Food and Drug Administration and allegations that it paid physicians to write prescriptions for another unapproved drug. The Report notes that 62 % of civil settlements and judgments involved pharmaceutical manufacturing.

Challenges OIG-HHS Intends to Address

Noted in the Report are two areas of program challenges, both of which OIG-HHS intends to address in the upcoming year.

  1. First, OIG-HHS noted a dearth of fraud referrals relating to Medicaid managed care organizations, despite an increase in the number of beneficiaries who receive their health care through managed care organizations. The FY 2014 Work Plan has already indicated that HHS-OIG will evaluate how effectively Medicaid managed care organizations identify and address potential fraud and abuse, and how states oversee those efforts.
  2. Second, OIG-HHS noted that the payment suspension rules put in place by the Affordable Care Act (“ACA”) are not fully implemented as planned. Under the ACA provisions, the State agencies are expected to suspend Medicaid payments based upon credible allegations of fraud, unless there is an identified “good cause” not to suspend payments. The State agencies expressed difficulty with determining what constituted a credible allegation of fraud, with the ability to make determinations in a timely manner, and with what should be the standard for a “good cause” exception. HHS-OIG indicates that it has undertaken additional reviews regarding payment suspensions based upon a credible allegation of fraud.

The Report is a reminder that state Medicaid fraud enforcement is active and that Medicaid compliance must remain an area of focus for providers, suppliers, and vendors (specifically including pharmaceutical manufacturers and others in the chain of distribution of prescription drugs to Medicaid beneficiaries).

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