Prosecuting Medicaid Fraud
in Texas
Senate Finance
Sub-Committee on Medicaid
February 15, 2011
Presented by:
David S. Morales
Deputy First Assistant Attorney General 1
Civil Medicaid Fraud
Division (CMF)
Authorized by the Texas Medicaid Fraud Prevention Act
(TMFPA), Human Resources Code, Chapter 36 to:
Investigate and prosecute “unlawful acts” under the
statute
Issue civil investigative demands
Require sworn answers to written questions
Obtain sworn testimony through examinations under
oath prior to litigation
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(CMF continued)
Remedies Under the TMFPA
Treble damages
Up to $10,000 civil penalty per violation
Revocation of provider agreement or license
Automatic exclusion from participation in Medicaid for
10 years
3
(CMF continued)
Private causes of action or qui tam actions
The OAG determines whether to prosecute on behalf of the
state
2007 Amendment allows the “relator” to continue the suit
even if the OAG does not intervene
In either case, the Texas Medicaid Program recovers
damages and the relator shares in the recovery.
(Texas retains an additional 10% of Medicaid recoveries due to
compliance with the 2005 Federal Deficit Reduction Act.)
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CMF Statistics
CMF Docket FY 2010
Pending Cases/Investigations 298
Cases Closed 63
Cases Opened 94
CMF settled and recovered funds in the following matters. The
recoveries listed on the next slide are the state and federal funds,
after deducting the relator shares and attorney’s fees.
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CMF Cases FY 2010
Case Recovery to Medicaid
State of Texas v. Mylan $5,642,016
State of Texas v.AstraZeneca $65,058
State of Texas v.UHS $3,712,118
State of Texas v. Aventis $2,783,130
State of Texas v.Otsuka $220,745
State of Texas v. Medtronic $449,835
State of Texas v.Pfizer $52,379,648
State of Texas ex rel Ven-A-Care
v. B.Braun $711,000
State of Texas v.FORBA/Small
Smiles $11,062
State of Texas v. Bayshore $330,745
State of Texas v. IVAX $224,255
State of Texas v. Omnicare $1,651,371
State of Texas ex rel Ven-A-Care v. Teva $27,326,454
State of Texas v. Ortho/Dermatop $438,182
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State of Texas v. Intermune $563,783
CMF Cases FY 2011
Case Recovery to Medicaid
State of Texas v. Astra Zeneca $21,674,142
State of Texas v. Novartis (TOBI) $9,527,698
State of Texas v. Novartis/McKee $15,190,457
State of Texas v. Glaxo $16,679,740
State of Texas v. Ortho $2,847,022
State of Texas ex rel Ven-A-Care v. Mylan $53,114,656
State of Texas v. Forrest/Gobble $7,210,383
State of Texas v. Allergan/Beilfuss $2,657,873
State of Texas v. KOS/Cashi $428,731
State of Texas ex rel Ven-A-Care v. Actavis
Jury verdict totaling over $170 million obtained on February 1, 2011.
This is the highest known verdict to be obtained in Travis County.
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CMF Pending Cases
Caremark for failure to reimburse Medicaid for pharmacy
benefits paid on behalf of dual eligible Medicaid recipients
Janssen Pharmaceuticals and its parent company, Johnson &
Johnson, regarding the marketing of the drug Risperdal.
Par pharmaceutical companies and their subsidiaries for
pricing fraud.
Caremark for falsely rejecting reimbursement requests from
Texas Medicaid.
Wyeth for rebate fraud, as part of a national litigation team.
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Medicaid Fraud Control Unit (MFCU)
MFCU conducts criminal investigations
into allegations of fraud, physical abuse,
and criminal neglect by Medicaid
providers.
57,000 Active Texas Healthcare Providers
3.7 Million Medicaid Recipients
2,400 Long-Term Care Facilities
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Statutory Authority
MFCU is authorized by 42 CFR 1007 and defined
in 1 TAC 371.1601 as the OAG division
responsible for investigating and prosecuting
Medicaid fraud committed by providers.
MFCU must report quarterly to the U.S.
Department of Health and Human Services –
Office of the Inspector General (HHSC-OIG).
Violations of state law are prosecuted under the
most appropriate Penal Code statute including
theft, misapplication of fiduciary property,
Medicaid fraud, and tampering with a government
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record.
Staff and Funding
STAFF:
In 2003, MFCU had 39 employees
HB 2292, 78th Texas Legislature expanded the staff
to 208.
FY 2010 FTE’s = 193 which reflects recent budget
cuts
FUNDING: FY 2010
State Budget Actual
HHS Grant $10.5 Million $10.1 Million
State Match* $4.4 Million $4.3 Million
Total $14.9 Million $14.4 Million
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Referral Sources
Source Number of Referrals
Dept. of Aging & Disability Services 93
FBI 7
Texas HHSC-OIG 147
Law Enforcement 9
MFCU Self-Initiated 32
National Association of MFCUs 6
Other State Agencies 4
Providers 7
Public 105
U.S. HHS-OIG 11
Other 21
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Investigations
FY-2003 FY2009 FY2010
Cases Opened 165 562 815
Pending Cases 309 1,342 1,433
Cases Presented 68 360 377
Convictions* 39 97 101
Overpayments
Identified $14.4 million $56 million $71.0 Million
* Approximately 36% in Federal Court
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Medicaid Fraud and Abuse
Referral Statistics
Action FY 2010
Cases Opened 815
Cases Closed 935
Cases Presented 377
Criminal Charges Obtained 154
Convictions 101
Potential Overpayments Identified $71,009,463.83
Misappropriations Identified $69,070.75
Cases Pending 1,433
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Provider Types
Practitioners
Doctors, Dentists, Podiatrists, Psychiatrists, LPCs
Medical Support
Pharmacies, Durable Medical Equipment Suppliers, Laboratories,
Medical Transportation Services, Home Health Care
Institutions
Hospitals, Nursing Homes
Others
Rehab Facilities, Chemical Dependency Treatment Centers,
Adult Day Care Facilities, Outpatient Care
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Types of Fraud
Billing for services not rendered
Billing for unnecessary services
Upcoding – Billing for a more expensive
service than was provided
Billing for services provided by unqualified staff
Kickbacks for patients
Padding Cost Reports
Billing for products/drugs not needed or not
delivered
Billing for diluted or Mexican drugs
Billing for ambulances used as a taxi
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Fraud Trends
Home Health Care Fraud Is Increasing
From 45 cases to 131 since 2006
DME Fraud Remains a Major Problem
Wheelchairs, Incontinence Supplies, Orthopedic Equipment
Ambulance Cases Fraud is Tapering Off
From 87 cases to 66 since 2006
Audiologist Fraud Is Increasing
Fitting patients in Nursing Homes, Adult Day Care Centers
Physicians and Physician Group Fraud is increasing
From 163 cases to 219 since 2006
Shift from Individuals to Physician Groups
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Additional Tools
Remove limitations on third-party recoveries that have
greatly reduced the CMF’s ability to sue for all of the
fraudulent claims filed under the Medicaid program.
Allow the state to file a lien for restitution that has been
ordered by a court as a result of a felony conviction
involving the state Medicaid program.
The OAG has been working with Senator Nichols and
Senator Seliger (SB 544) to assist both MFCU and CMF in
investigating and prosecuting cases.
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