California Department California Department of Health Care of Health Care

Services Services

Audits and Investigations, Audits and Investigations,

Medical Review Branch,Medical Review Branch,

March 2008March 2008

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To protect the fiscal integrity of To protect the fiscal integrity of California’s publicly funded health care California’s publicly funded health care programs.programs.

To ensure quality health care services To ensure quality health care services are delivered to Medi-Cal Beneficiaries.are delivered to Medi-Cal Beneficiaries.

Audits & Investigations Audits & Investigations Mission StatementMission Statement

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Medi-Cal FraudMedi-Cal Fraud Medi-Cal fraud represents a complex and Medi-Cal fraud represents a complex and

multi-faceted problem.multi-faceted problem. New fraudulent schemes continue to New fraudulent schemes continue to

surface.surface. Unscrupulous providers are continually Unscrupulous providers are continually

testing our ability to identify misuse of the testing our ability to identify misuse of the Medi-Cal Program.Medi-Cal Program.

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Improper use of beneficiary IDsImproper use of beneficiary IDs Providers rendering services that vary from normsProviders rendering services that vary from norms Providers billing for services not renderedProviders billing for services not rendered Providers exploiting vulnerable populations for Providers exploiting vulnerable populations for

economic gaineconomic gain Improper use of provider IDsImproper use of provider IDs Providing services that are not medically necessaryProviding services that are not medically necessary Payment of “kickbacks” to beneficiaries (capping) in Payment of “kickbacks” to beneficiaries (capping) in

order to bill Medi-Cal for unnecessary servicesorder to bill Medi-Cal for unnecessary services Failure to disclose true ownership on Medi-Cal Failure to disclose true ownership on Medi-Cal

application (willful misrepresentation) application (willful misrepresentation) Up coding to obtain a higher rate of reimbursementUp coding to obtain a higher rate of reimbursement

What does fraud look like?What does fraud look like?

Fraud presents itself in many forms:Fraud presents itself in many forms:

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Research confirms that fraud costs the Research confirms that fraud costs the Program a great deal.Program a great deal.

Small numbers of beneficiaries can Small numbers of beneficiaries can generate repetitious billings by generate repetitious billings by providers for enormous sums in providers for enormous sums in fraudulent payments.fraudulent payments.

Collusion among providers is a popular Collusion among providers is a popular scheme utilized to defraud the Medi-Cal scheme utilized to defraud the Medi-Cal Program.Program.

The Cost of FraudThe Cost of Fraud

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1,915 beneficiaries during a 12 1,915 beneficiaries during a 12 month period cost the Medi-Cal month period cost the Medi-Cal program $67,000,000 in outpatient program $67,000,000 in outpatient servicesservices

Or, $34,987 per-userOr, $34,987 per-user Or, $2,916 per user-per-monthOr, $2,916 per user-per-month

The Cost of Fraud is The Cost of Fraud is SignificantSignificant

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Anti-Fraud SavingsAnti-Fraud Savings

As a result of Anti-Fraud As a result of Anti-Fraud efforts over $efforts over $2 billion savings 2 billion savings

since 1999since 1999

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SAVINGSSAVINGS Re-EnrollmentRe-Enrollment WithholdsWithholds Temporary SuspensionsTemporary Suspensions Special Claims ReviewSpecial Claims Review Provider Prior Provider Prior

AuthorizationAuthorization Field Audit Reviews/UCField Audit Reviews/UC Audits for RecoveryAudits for Recovery Lab ReviewsLab Reviews DentalDental BIC ReplacementBIC Replacement

TOTAL TOTAL $1,204,541,873$1,204,541,873

COST AVOIDANCECOST AVOIDANCE Pre-EnrollmentsPre-Enrollments Lab EnrollmentLab Enrollment Managed CareManaged CareTOTAL TOTAL $752,415,141$752,415,141

LEGAL ACTIONSLEGAL ACTIONS Criminal ConvictionsCriminal Convictions Civil Civil

Judgments/SettlementsJudgments/SettlementsTOTAL TOTAL $ 138,413,550$ 138,413,550

Court Ordered RestitutionCourt Ordered Restitution

TOTAL TOTAL $78.9 million$78.9 million

Cumulative Anti-Fraud SavingsCumulative Anti-Fraud SavingsJuly 1, 1998 through June 30, 2007July 1, 1998 through June 30, 2007

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Data sharing with CMSData sharing with CMS

California was the first state to California was the first state to partner with the Federal Centers for partner with the Federal Centers for Medicare and Medicaid Services Medicare and Medicaid Services (CMS) in data-sharing on providers(CMS) in data-sharing on providers

Provides more detailed information Provides more detailed information on suspect providers on suspect providers

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Key LegislationKey Legislation

AB1699 (2002)AB1699 (2002)Added Section 100185.5 to the Health and Safety Code and authorizes Added Section 100185.5 to the Health and Safety Code and authorizes the Director to deny continued enrollment, suspend, or withhold the Director to deny continued enrollment, suspend, or withhold payments to a payments to a Medi-Cal Provider if they duplicate fraud from one program to another or Medi-Cal Provider if they duplicate fraud from one program to another or have had multiple utilization controls. have had multiple utilization controls.

SB 857 – (2004)SB 857 – (2004)Amends several sections of the Welfare and Institution Code (W&I) Amends several sections of the Welfare and Institution Code (W&I)

adding adding provisional provider status, providing DHCS with the ability to levy provisional provider status, providing DHCS with the ability to levy civil money civil money penalties, collect overpayments in a more timely manner, penalties, collect overpayments in a more timely manner, and impose procedure and impose procedure code limitations when warranted.code limitations when warranted.

AB 530 – (2006)AB 530 – (2006) Added Section 14123.05 to the W&I Code and became effective Added Section 14123.05 to the W&I Code and became effective

January 2007. January 2007. Gives sanctioned Medi-Cal providers the opportunity to Gives sanctioned Medi-Cal providers the opportunity to participate in meet & participate in meet & confer meetings with DHCS.confer meetings with DHCS.

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The Investigations Branch (IB) is charged with the The Investigations Branch (IB) is charged with the responsibility to protect the fiscal integrity of the responsibility to protect the fiscal integrity of the California’s publicly funded health care programs. California’s publicly funded health care programs.

IB Fraud Investigators are sworn law enforcement IB Fraud Investigators are sworn law enforcement officers who conduct criminal and civil officers who conduct criminal and civil investigations into various Medi-Cal program investigations into various Medi-Cal program fraud, both beneficiary and providers.fraud, both beneficiary and providers.

Medi-Cal Beneficiary Fraud:Medi-Cal Beneficiary Fraud: Early Fraud Detection Program (EFDP)Early Fraud Detection Program (EFDP) Income Verification Eligibility Verification System (IEVS)Income Verification Eligibility Verification System (IEVS) Failure to Report Other Insurance CoverageFailure to Report Other Insurance Coverage Drug Utilization Enforcement (DUE)Drug Utilization Enforcement (DUE) Social Security – Cooperative Disability InvestigationsSocial Security – Cooperative Disability Investigations In Home Support ServicesIn Home Support Services Women, Infants and Children Program (WIC)Women, Infants and Children Program (WIC) Vital Statistics InvestigationsVital Statistics Investigations

Investigations Branch Investigations Branch Investigations, Reviews and Investigations, Reviews and

TechniquesTechniques

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IB Fraud Investigators work with numerous allied IB Fraud Investigators work with numerous allied agencies, including:agencies, including: The county welfare departments, eligibility workers, social The county welfare departments, eligibility workers, social

workers, the special investigative units (Welfare Fraud workers, the special investigative units (Welfare Fraud Investigators) and the county Auditor Controllers OfficeInvestigators) and the county Auditor Controllers Office

Federal Agencies:Federal Agencies: The FBI, Health and Human Services, the Social Security The FBI, Health and Human Services, the Social Security

Administration, Federal Courts, Housing Utilization and Administration, Federal Courts, Housing Utilization and Development (HUB) and the Drug Enforcement AdministrationDevelopment (HUB) and the Drug Enforcement Administration

State Departments:State Departments: The State Controllers Office, Franchise Tax Board, The State Controllers Office, Franchise Tax Board,

Department of Justice, Bureau of Medi-Cal Fraud and Elder Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse, the Bureau of Narcotics Enforcement, State Abuse, the Bureau of Narcotics Enforcement, State Department of Social Services, Adult Programs and Fraud Department of Social Services, Adult Programs and Fraud Bureau, the California Welfare Fraud Investigators Bureau, the California Welfare Fraud Investigators Association, the California Department of Consumer Affairs, Association, the California Department of Consumer Affairs, Department of Mental Health, Alcohol and Drug Program, Department of Mental Health, Alcohol and Drug Program, Department of Development Disabled and the Highway PatrolDepartment of Development Disabled and the Highway Patrol

City and Local Departments:City and Local Departments: Police and sheriff, county grand juries and county counselPolice and sheriff, county grand juries and county counsel

Allied AgenciesAllied Agencies

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The Centers for Medicare & Medicaid Services (CMS) The Centers for Medicare & Medicaid Services (CMS) implemented the PERM program to measure implemented the PERM program to measure improper payments in the Medicaid program and the improper payments in the Medicaid program and the State Children's Health Insurance Program (SCHIP).State Children's Health Insurance Program (SCHIP).

PERM is designed to comply with the Improper PERM is designed to comply with the Improper Payments Information Act of 2002 (IPIA; Public Law Payments Information Act of 2002 (IPIA; Public Law 107-300), which requires a report to Congress.107-300), which requires a report to Congress.

Three contractors perform statistical calculations, Three contractors perform statistical calculations, medical records collection, claims review and medical records collection, claims review and medical/data processing review of selected State medical/data processing review of selected State Medicaid and SCHIP fee-for-service (FFS) and Medicaid and SCHIP fee-for-service (FFS) and managed care claims.managed care claims.

2007 Payment Error Rate 2007 Payment Error Rate Measurement (PERM)Measurement (PERM)

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In FY 2006, CMS reviewed only fee-for-In FY 2006, CMS reviewed only fee-for-service Medicaid claims. service Medicaid claims.

In FY 2007, PERM was expanded to include In FY 2007, PERM was expanded to include reviews of fee-for-service and managed reviews of fee-for-service and managed care claims, as well as beneficiary eligibility, care claims, as well as beneficiary eligibility, in both the Medicaid and SCHIP programs.in both the Medicaid and SCHIP programs.

Each state participates in the PERM Each state participates in the PERM program once every 3 years (17 states per program once every 3 years (17 states per year) on a rotational basis. All 50 states are year) on a rotational basis. All 50 states are reviewed every 3 years.reviewed every 3 years.

California is a year 2 state (2007, 2010, California is a year 2 state (2007, 2010, 2013…).2013…).

2007 Payment Error Rate 2007 Payment Error Rate Measurement (PERM)Measurement (PERM)

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Based upon the error rate, states must return Based upon the error rate, states must return their Federal share of overpayments within 60 their Federal share of overpayments within 60 days. days.

CMS published the final rule for PERM on August CMS published the final rule for PERM on August 31, 2007, which sets forth State requirements for 31, 2007, which sets forth State requirements for submitting claims and policies to the CMS Federal submitting claims and policies to the CMS Federal contractors for purposes of conducting fee-for-contractors for purposes of conducting fee-for-service and managed care reviews. This final rule service and managed care reviews. This final rule also sets forth the State requirements for also sets forth the State requirements for conducting eligibility reviews and estimating case conducting eligibility reviews and estimating case and payment error rates due to errors in eligibility and payment error rates due to errors in eligibility determinations.determinations.

The California MPES is the equivalent to the PERM.The California MPES is the equivalent to the PERM.

2007 Payment Error Rate 2007 Payment Error Rate Measurement (PERM)Measurement (PERM)

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The first MPES was conducted in 2004. The first MPES was conducted in 2004. DHCS is currently conducting the fourth DHCS is currently conducting the fourth annual MPES.annual MPES.

The MPES has been conducted yearly. The MPES has been conducted yearly. After this year, MPES will be conducted After this year, MPES will be conducted every two years.every two years.

This study allows the State to measure the This study allows the State to measure the error rate of payments for Medi-Cal error rate of payments for Medi-Cal services and will enhance the system used services and will enhance the system used to assure proper payment for services to assure proper payment for services rendered to Medi-Cal beneficiaries.rendered to Medi-Cal beneficiaries.

Medi-Cal Payment Error Study Medi-Cal Payment Error Study (MPES)(MPES)

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The 2007 MPES is a review of a sample of The 2007 MPES is a review of a sample of claims that were paid between April 1, claims that were paid between April 1, 2007 and June 30, 2007 to determine if the 2007 and June 30, 2007 to determine if the documentation of service supports the documentation of service supports the claims submitted for Medi-Cal claims submitted for Medi-Cal reimbursement. reimbursement.

The MPES develops an estimate of dollar The MPES develops an estimate of dollar loss due to potential fraud, identifies and loss due to potential fraud, identifies and quantifies program vulnerabilities, and quantifies program vulnerabilities, and identifies how best to deploy Medi-Cal identifies how best to deploy Medi-Cal antifraud resources.antifraud resources.

Medi-Cal Payment Error Study Medi-Cal Payment Error Study (MPES)(MPES)

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Evaluation ActivitiesEvaluation Activities

Audits for RecoveryAudits for Recovery Enrollment ReviewsEnrollment Reviews Utilization ReviewsUtilization Reviews Field Audit Reviews (Pre-Payment)Field Audit Reviews (Pre-Payment) Special ProjectsSpecial Projects

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ConsequencesConsequences

Utilization ControlsUtilization Controls

Post Service Pre Post Service Pre Payment Audit (SCR)Payment Audit (SCR)

Prior AuthorizationPrior Authorization

Civil Money Penalty Civil Money Penalty (Warning Notices) (Warning Notices)

Sanctions/SuspensionsSanctions/Suspensions

WithholdWithhold Temporary SuspensionTemporary Suspension Procedure Code LimitationProcedure Code Limitation Permissive SuspensionPermissive Suspension Mandatory SuspensionMandatory Suspension Immediate SuspensionImmediate Suspension Civil Money Penalty Civil Money Penalty

(Imposition of Fines) (Imposition of Fines)

2020

Number of Sanctions ImposedNumber of Sanctions Imposed

0 3

305

204

70 63 6934

196159

79

134

0

50

100

150

200

250

300

350

PPA CMP-FirstWarning Ltr

TS WH SCR PCL

Type of Sanction

2006 2007

Type # of Open CasesAFR 46Biller Reviews 1Desk Audits 33Education Reviews

1Enrollments 54FAR 133Referrals 8Special Projects 10

2121

Number of Cases Currently on Number of Cases Currently on SanctionSanction

PPA, 73

CMP-First Warning Ltr,

748

TS, 407

WH, 321

SCR, 287

PCL, 173 Type of # of Sanction ProvidersPPA 73CMP - FirstWarning Ltr 748TS 407WH 321SCR 287PCL 173

** According to the Medi-Cal PCL list on Medi-Cal website there are only 72 providers on PCL

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Number of Cases on Which Number of Cases on Which Sanctions Were PlacedSanctions Were Placed

AFR, 46

Biller Reviews, 1

Desk Audits, 33

Education Reviews, 1

Enrollments, 54

FAR, 133

Special Projects, 10

Referrals, 8 # of Providers

2006 2007PPA 0 3CMP-First Warning Ltr 305

204TS 70 63WH 69 34SCR 196 159PCL 79 134

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CONTACT INFORMATIONCONTACT INFORMATION

The DHCS Medi-Cal Fraud Hotline The DHCS Medi-Cal Fraud Hotline telephone number: telephone number: 1-800-822-6222 1-800-822-6222

The recorded message may be heard in The recorded message may be heard in English and four other languages: Spanish, English and four other languages: Spanish, Vietnamese, Cambodian, and Russian. The Vietnamese, Cambodian, and Russian. The call is free and the caller may remain call is free and the caller may remain anonymous. anonymous.

You can also send an e-mail to: You can also send an e-mail to: stopmedicalfraud@dhs.ca.govstopmedicalfraud@dhs.ca.gov