CMS Proposes to Expand Medicaid Fraud Control Unit Authority

September 20, 2016 - A recently proposed rule would codify several statutory changes involving Medicaid Fraud Control Units, including the authority to investigate patient and abuse cases at healthcare facilities regardless of if they receive Medicaid payments.*

The Department of Health and Human Services Office of Inspector General in conjunction with CMS* published a proposed rule in the Federal Register earlier this week that would update the Medicaid fraud program, which has undergone only two amendments since its establishment in 1978. The proposed rule addresses new authorities for the Medicaid Fraud Control Units, state requirements for maintaining a unit, and federal matching rates for ongoing operating costs.

“In the ensuing years, growth of the MFCU [Medicaid Fraud Control Units] program to 50 Units (49 States and the District of Columbia) as well as changes in MFCU practice, healthcare, and the workplace have led to the need for many amendments to the regulation,” wrote CMS.

As part of the program’s renovation, the federal agency proposes to grant Medicaid Fraud Control Units the authority to look into complaints of abuse and neglect in board and care facilities regardless of the source or payments. The review would be subject to approval from the relevant Inspector General. Units are currently only allowed to investigate patient abuse or neglect complaints at healthcare facilities receiving Medicaid payments.

Under the proposed rule, the definition of patient abuse or neglect would expand to include financial abuse. Units would have the power to also review complaints related to misappropriation of patient funds.

The federal agency also proposes to change the definition of provider in the program to include all providers who are required to enroll in a state Medicaid program, including ordering and referring physicians. The proposed change would allow units to investigate and prosecute providers even if they are not the ones who furnished the items or services in question for which the payment is claimed under Medicaid.

Medicaid Fraud Control Units themselves would also face new operating requirements under the proposed rule. CMS would require that states operate an effective unit as part of its Medicaid State plan unless the state determines the unit would not be cost-effective because of limited Medicaid fraud cases.

The rule would give CMS the authority to assess whether a state must maintain a unit and determine if the unit complies with the regulation’s requirements. The proposed rule would update the definition of a compliant unit to a “single identifiable entity” that is certified. To satisfy the requirements, a Medicaid Fraud Control Unit must function as a single organization that reports to a single Unit director, operate under its own budget, and maintain a headquarters office and any field offices in a contiguous space.

“We believe that each of these three characteristics is necessary to ensure that Unit is able to operate independently of its parent agency and to maintain its independent character as a single, identifiable entity,” the proposal states.

State Medicaid programs would also be required to enter into written agreements with the units to develop regular communication or meetings as well as written procedures for coordination efforts. The agreements would have to be renewed or updated every five years.

In addition to state Medicaid agency and unit collaboration, the proposed rule would also boost coordination between the fraud teams and the Office of the Inspector General. Units would have to participate in regular meetings or communication with the federal office.

“We believe that requiring regular meetings or communication with OIG investigators and with Federal prosecutors will strengthen relationships, enhance the effectiveness of fraud investigations and prosecutions, and ultimately improve the integrity of the Medicaid program,” states the proposal.

Additionally, the proposed rule would update Federal matching rates for operating costs after the first three years of operation. Congress currently matches 90 percent of the unit operating costs for 12 quarters to help states develop an effective unit. After the initial 12 quarters, Congress would match 75 percent of ongoing operating costs.

The proposed rule would add the federal matching rates to the regulation.*

The proposed rule came almost a week after the Office of Inspector General released its annual report on Medicaid Fraud Control Units. In 2015, the federal office found that the units reported over 1,550 convictions with nearly one-third involving personal care or home health services. OIG also stated that the units reported $744 million in criminal and civil recoveries last year.

While the number of civil settlements and recoveries has decreased in the last five years, OIG added, 2015 saw the largest number of convictions for Medicaid Fraud Control Units since 2011.

*CORRECTIONS: The article previously stated that the proposed rule would grant new authorities to Medicaid Fraud Control Units and change federal matching rates. The proposed rule codifies regulations that have been in practice. The article also previously stated the rule was proposed by CMS, but it was proposed by Department of Health and Human Services Office of Inspector General in conjunction with CMS.

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