By Jennifer J. Thomas

The Centers for Medicare and Medicaid Services, Office of the Inspector General (“OIG”) published a Proposed Rule in the September 20, 2016 Federal Register that would change the structure and expand the authority of State Medicaid Fraud Control Units (“MFCU”). The OIG wants to change the Federal participation in the costs attributable to establishing and operating a MFCU as well as incorporate into the rule statutory and policy changes that have occurred since 1977. Those changes include:

  1. raising the Federal matching rate for ongoing operating costs from fifty (50) to seventy-five (75) percent;
  2. establishing a Medicaid State plan requirement that a State must operate an “effective MFCU”;
  3. establishing standards under which MFCUs must be operated;
  4. allowing MFCU’s to seek approval from the Inspector General to investigate and prosecute violations of State law related to fraud in any aspect of the provision of health care services under any Federal health care program, including Medicare, as long as the fraud is primarily related to Medicaid; and
  5. giving MFCUs the option to investigate and prosecute patient abuse, neglect, or misappropriation of patient funds regardless of whether the providing facility receives Medicaid payments.

The Proposed Rule adds or revises several definitions to expand the authority of the MFCU to prosecute. For example, “board and care facility” would be added so that under item (5) listed above the MFCUs investigative authority would now include complaints of abuse or neglect at facilities at non-Medicaid assisted living facilities. The definition of “provider” would be amended to include those who are required to enroll in a State Medicaid program, such as ordering and referring physicians. The intent of this amendment is to clarify the providers who are not furnishing items or services for which payment is claimed directly under Medicaid, such as those providers enrolled in managed care, can be the subject of a MFCU investigation and prosecution. A definition of “fraud” is to be added to clarify the MFCU’s authority to investigate and prosecute both criminal and civil fraud.

The Proposed Rule would change MFCU staffing requirements to require all employees, whether part-time or full-time, to devote their “exclusive effort” to MFCU functions. Each MFCU must employ a director who would supervise all MFCU employees. The MFCU must be a “single identifiable entity in State government” and would operate under its own budget separate from that of its parent agency.

All MFCU’s under the Proposed Rule would be required to submit all convictions to the OIG for purposes of program exclusion within 30 days of sentencing. MFCUs would also be required to make information on investigations involving the same suspects or allegations to the OIG investigators and attorneys.  If the MFCU discovers an overpayment made to a provider or facility, the MFCU must either recover the overpayment or refer the matter to the proper State agency for collection.

The MFCU changes outlined in the Proposed Rule are not yet final. Any person can submit comments to the OIG by 5:00 p.m. Eastern Standard Time on November 21, 2016. If the changes in the Proposed Rule are made, it could result in increased investigations and prosecutions by State MFCUs against a broader scope of providers and facilities.