United States: Texas OIG Turns Over New Leaf: MCOs Must Turn Attention To SIUs

More active SIUs may mean more scrutiny of Medicaid providers

The Texas Office of Inspector General (OIG) has just completed its first full year of reforms under a new Inspector General. 2017 may reveal whether these reforms mean good news or bad news for Medicaid providers – but already the changes have increased scrutiny of Medicaid managed care organizations (MCO), particularly of their Special Investigative Units (SIU). An SIU investigates suspected waste, abuse, and fraud on behalf of its respective MCO.

The shift in the OIG's focus followed criticism during the Texas Legislature's Sunset Review in 2015 of the OIG's first twelve years of existence. The Legislature found that, among other things, the OIG's investigations of Medicaid fraud, waste, and abuse accomplished little more than abuse of healthcare providers. The resulting 2015 legislation sought to improve the OIG's investigative processes and better define its role in overseeing SIUs.

Stuart Bowen, who replaced the controversial previous Inspector General in 2015, announced early on his intention to refocus the OIG's efforts on MCOs. In a September 2015 report – the OIG's first public report since 2011 – he announced that his main goal would be "to strengthen [the OIG's] capacity to investigate and audit in the managed care world. To be frank," he further said, "this office egregiously lagged in achieving concrete results and meaningful deterrence in the managed care environment."

More than 80% of present Texas Medicaid services (and 100 percent of CHIP services) are delivered through MCOs. So it is no surprise that the OIG's activities in 2016 underscored a new emphasis on MCOs.

Inspector General Bowen personally visited many MCOs last year, and the OIG conducted audits of ten SIUs, including an audit of a third-party SIU contractor. While individual SIUs differed dramatically in their level of performance, the OIG's overall conclusion was apparent: SIUs can do a better job of recovering Medicaid overpayments.

The audit reports are available on the OIG's website. Of the ten SIUs audited by the OIG, the third largest (as measured by medical claims paid) – Texas Children's Health Plan – boasted by far the greatest SIU recoveries at $1.4 million. In contrast, a plan that paid medical claims exceeding $7 billion (compared with Texas Children's $1.6 billion) recovered a mere $16,000 in overpayments during the same two-year period. Four of the audited SIUs recovered nothing at all.

The OIG estimates that fraud, waste, and abuse account for 20% to 40%of Medicaid medical claims dollars nationally and, by implication, in Texas as well. Yet Texas MCOs' recoveries of overpayments amount to far less than one percent of expenditures.

Several factors could account for these modest recoupments. Some SIUs appear not to even try to recover overpayments. Others SIUs may have less need to pursue recoveries because they do an exceptional job of preventing them in the first place. Fear of inflaming providers or making regulatory missteps may also inhibit SIUs' activities. Additionally, an MCO's only remaining option for recovering overpayments should the OIG opt not to pursue a potential fraud case may be a civil lawsuit, with its inherent costs and risks. Litigation can be especially challenging if the OIG sits on a fraud referral from an MCO before rejecting it years later.

The OIG concluded each SIU audit with recommendations to the Health & Human Services Commission's Medicaid/CHIP Division for inclusion in corrective action plans. The OIG has promised to issue a final summary report in early 2017 that will provide comprehensive recommendations for improving SIUs. Based on the reports published thus far, the recommendations will likely revolve around:

  • Development of fully functional SIUs that actively participate in detection and investigation of suspected fraud, waste, and abuse;
  • More extensive use of pre- and post-payment data analytics to identify and recover overpayments;
  • Better training of MCO personnel along with third-party contractors of MCOs;
  • Improved accuracy in reports on overpayments; and
  • "Tailored contractual remedies" in MCO contracts with the State to compel MCOs to perform in compliance with OIG recommendations.

So far, the OIG has presented its findings in an even-handed tone, but the promise of new "recommendations" (read, "requirements") and greater oversight will surely increase the heart rates of those responsible for SIUs. The inescapable inference from the reports is the OIG expects SIUs to achieve greater recoupments in 2017.

And while the OIG has indicated its intention to pursue true Medicaid fraudsters, as opposed to honest providers culpable of mere technical violations, it is difficult not to predict that if SIUs find themselves under pressure to increase recoupments, their own scrutiny will necessarily be turned on those from whom they might recoup.

In other words, Medicaid providers, you may be next.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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