1. MEDICARE AND MEDI-CAL INVESTIGATIONS
AND COORDINATION OF ENFORCEMENT
PROCEEDINGS - RECENT DEVELOPMENTS
Vince Blackburn Harry Nelson
Senior Counsel Fenton Nelson, LLP
Office of Legal Services
California Department of Healthcare Services

2. OVERVIEW OF PRESENTATION
 Overview
 Medi-Cal
 Understanding the Investigation and
Enforcement Tools of the Medi-Cal Program
 Medicaid Integrity Contractor Audits
 Medicare
 MAC‟s
 ZPIC‟S
 RAC‟s
 Latest Developments/Trends

3. BACKGROUND: REDUCING HEALTH CARE
SPENDING VIA FRAUD ENFORCEMENT
Government How much
Medi/Medi spending is fraud
financial obligations or waste?
(2020 CBO est. $1t
Medicare/$458b Medicaid; +7%yr) (Est. 3-10%)
"Medicare has at least $80 billion worth of fraud a year. That's a full 20
percent of every dollar that's spent on Medicare goes to fraud.“—Sen.
Tom Coburn
“It is not possible to measure precisely the extent of fraud in Medicare
and Medicaid.“-- Daniel Levinson, HHS Inspector General

4. DEFINING MEDI/MEDI FRAUD AND ABUSE
42 CFR 455.1 (Program Integrity: Medicaid) definitions:
 Fraud means an intentional deception or misrepresentation made
by a person with the knowledge that the deception could result in
some unauthorized benefit to himself or some other person. It
includes any act that constitutes fraud under applicable Federal
or State law related to Medicaid.
 Abuse means provider practices that are inconsistent with sound
fiscal, business, or medical practices, and result in an
unnecessary
cost to the Medicaid program, or in reimbursement for services
that
are not medically necessary of that fail to meet professional
recognized standards for health care. It also includes recipient
practices that result in unnecessary costs to the Medicaid

5. RESPONSIBLE ENTITIES
 Medi-Cal
 Department of Health Care Services
 California Dept of Justice Bureau of Medi-Cal Fraud and Elder Abuse
(California‟s Medicare Fraud Control Unit (MFCU)
 Medicaid Integrity Program Contractor (MIP, MIC)
 Medicare
 DOJ/FBI/HHS-OIG
 Medicare Administrative Contractor (MAC)
 Recovery Audit Contractor (RAC)
 Medicare Secondary Payor RAC (MSP RAC)
 Zone Program Integrity Contractor (ZPIC) (formerly Program
Safeguard Contractor (PSC))
 Qualified Independent Contractor (QIC)
For full contractors list, see http://www2.cms.gov/ Medicare
ContractingReform/Downloads /FunctionalEnvironment.pdf

6. MEDI-CAL INVESTIGATIONS
DEPARTMENT OF HEALTH CARE
SERVICES
ENFORCEMENT OVERVIEW

7. FIRST LINE OF DEFENSE:
PROVIDER ENROLLMENT GATEWAY
 “A complete application package includes the
application, provider agreement, disclosure
statement and all required attachments … .”
Directions on medi-cal.ca.gov Provider
Enrollment website

8. ONSITE WORK: AUDIT
 “Amounts paid for services provided to Medi-
Cal beneficiaries shall be audited by the
department in the manner and form
prescribed by the department.”
 “[C]ost reports and other data … shall be
considered true and correct unless audited or
reviewed within three years after the close of
the period covered by the report … .”
Welfare and Institutions Code § 14170

9. ONSITE WORK: INFORMAL REVIEW
 “The department [of Health Care Services] may
make unannounced visits to any applicant or to
any provider for the purpose of determining
whether enrollment, continued enrollment, or
certification is warranted, or as necessary for
the administration of the Medi-Cal program.”
Welfare and Institutions Code, § 14043.7(a)
 “During normal working hours, the department
[of Health Care Services] may make any
examination of the books and records of, and
may visit and inspect the premises or facilities of
[providers.]”
Welfare and Institutions Code, § 14124.2(a)(1)

10. REMEDIAL AND PREVENTATIVE MEASURES:
PPM AUDIT
 “Postservice prepayment audit … is review for
medical necessity and program coverage after
service was rendered but before payment is
made. Payment may be withheld or reduced if
the service rendered was not a covered benefit,
deemed medically unnecessary or
inappropriate.”
Welfare and Institutions Code, § 14133(b)
 “Special claims review may be imposed on a
provider upon a determination that the provider
has submitted improper claims, including claims
which incorrectly identify or code services
provided.”
California Code of Regulations, title 22, §
51460(a)

11. REMEDIAL AND PREVENTATIVE MEASURES:
PRIOR AUTHORIZATION
“The director, or a carrier acting under
regulations adopted by the director, may
require that any individual provider shall
receive prior authorization before providing
services when the director or carrier
determines that the provider has been
rendering unnecessary services.”
Welfare and Institutions Code, § 14103.6

12. FRAUD CONTROL:
CIVIL MONEY PENALTIES
 A variety of improper billing scenarios may be
grounds for “a civil money penalty of not more
than three times the amount claimed for each
item or service.”
Welfare and Institutions Code, § 14123.2
 Improper claims “for a service or item about
which the provider has received two or more
warning notices of improper billing, [may]
subject [the provider] to a civil money penalty of
one hundred dollars ($100) per claim, or up to
two times the amount improperly claimed for
each item or service, whichever is greater.”
Welfare and Institutions Code, § 14123.25(c)

13. FRAUD CONTROL:
PROCEDURE CODE LIMITATIONS
 “The department [of Health Care Services]
may limit, for 18 months or less, the [CPT-4,
NDC, HCPCS, or HIPAA codes] for which
any provider may bill” if:
 “The department determines, by audit or
other investigation, that excessive services
or billings, or abuse, has occurred” or
 “The Medical Board of California or other
licensing authority or a court of competent
jurisdiction limits a licensee's practice of
medicine or the rendering of health care.”
Welfare and Institutions Code, § 14044(a)

14. FRAUD CONTROL:
WITHHOLDING OF FUNDS
“Upon receipt of reliable evidence that would
be admissible under [Section 11500 et seq.]
of the Government Code, of fraud or willful
misrepresentation … the department may …
[w]ithhold payment for any goods, services,
supplies, or merchandise, or any portion
thereof.”
Welfare and Institutions Code, § 14107.11

15. FRAUD CONTROL:
TEMPORARY SUSPENSION
“If it is discovered that a provider is under
investigation by the department or any state,
local, or federal government law enforcement
agency for fraud or abuse, that provider shall
be subject to temporary suspension from the
Medi-Cal program.”
Welfare and Institutions Code, § 14043.36

16. FRAUD CONTROL:
PERMISSIVE SUSPENSIONS
“The director may suspend a provider of
service from further participation under the
Medi-Cal program for violation of any
provision of [Welfare and Institutions Code
sections 14000 through 14499.77] or any
rule or regulation promulgated by the director
[of the Department of Health Care Services]
pursuant to those chapters. ”
Welfare and Institutions Code, § 14123(a)

17. FRAUD CONTROL:
MANDATORY SUSPENSIONS
“The director shall suspend a provider of
service for conviction of any felony or any
misdemeanor involving fraud, abuse of the
Medi-Cal program or any patient, or
otherwise substantially related to the
qualifications, functions, or duties of a
provider of service.”
Welfare and Institutions Code, § 14123(a)

18. PROVIDER REMEDIES:
MEET AND CONFER
“The department shall develop, in consultation
with provider representatives … a process that
enables a provider to meet and confer with the
appropriate department officials within 30 days
after the issuance of a letter notifying the
provider of a temporary withhold of payments,
pursuant to Section 14107.11, or a temporary
suspension, pursuant to subdivision (a) of
Section 14043.36, for the purpose of presenting
and discussing information and evidence that
may impact the department's decision to modify
or terminate the sanction.”
Welfare and Institutions Code, § 14123.05

19. MEDI-CAL INVESTIGATIONS
 THE MEDICAID INTEGRITY AUDIT
INITIATIVE

20. DEFICIT REDUCTION ACT OF 2005
 Section 6034 (42 U.S.C. § 1396u-6): Creation of
Medicaid Integrity Program (MIP)
 Significant Increase of CMS and HHS-OIG
Resources to Fight Medicaid Fraud
 Funding - $560M over 5 Years
 $255m for Medicaid Integrity Program
 $180m for National Medi-Medi Expansion
 $125m for OIG for Medicaid Fraud
 Staffing - 100 FTEs for CMS
 First national anti-fraud program for Medicaid
20

21. DEVELOPMENTS: THE MEDICAID INTEGRITY
PROGRAM (“MIP”)
 1st federal attempt to audit Medicaid
programs based on suspected higher error
rates
 CMS delegated • Division of Medicaid Integrity
Contracting (Oversees MIC‟s)
responsibility for the MIP 1
to the Medicaid Integrity • Division of Fraud Research and
Detection (identifying fraud patterns
and trends and reporting to MIC‟s
Group ("MIG"). 2 and states)
 Office of the Group • Division of Field Operations (SF)
• program integrity reviews of the
Director oversees: states
3 • technical assistance/training to states

22. TYPES OF MEDICARE INTEGRITY CONTRACTORS
(MIC’S)
 Education MICs
 responsible for educating providers, beneficiaries, and
others on program integrity and quality of care issues
 review MICs
 Review MICs (California (Reg. IX): AdvanceMed)
 analyze Medicaid providers„
 claims data for evidence of atypical billing practices that
could result in overpayments.
 Audit MICs (California (Reg. IX): Health
Management Solutions (HMS)
 post-payment audits of Medicaid providers.
 leads received from CMS, state agencies, or review of
MIC‟s

23. MIC AUDIT PROCESS
 Focus: responsibility for monitoring and compliance with
contract provisions relating to fraud and abuse prevention
and reporting (recipients, providers, representatives)
 Process:
 Identify potential audit targets through data analysis
 Vet potential audits with State and law enforcement
 Assignment to Audit MIC
 Actions following audit can include:
 prepayment review
 recommendations for termination
 site visits
 sanctions

24. THE MEDICARE-MEDICAID DATA MATCH
PROGRAM (“THE MEDI-MEDI PROJECT”)
 CMS partnership with the State of California to improve
coordination of Medicare and Medicaid program integrity
efforts. Integrity program launched in California in 2001 to
detect and prevent Medicaid fraud and abuse.
 Expanded to other states after the Deficient Reduction Act
of 2005 increased funding to $480 million over a 10-year
period for nat‟l roll-out.
 Objective: match Medicare and Medicaid data to
proactively identify program vulnerabilities and potential
fraud and abuse that may have gone undetected by
reviewing Medicare and Medicaid program data
individually.

25. MEDICARE INVESTIGATIONS
MAC‟s
ZPIC‟s
RAC‟s

26. MEDICARE ADMINISTRATIVE
CONTRACTORS (MAC)
 Responsible for ensuring payment of correct
amounts for covered and correctly coded
services rendered to eligible beneficiaries by
legitimate providers
 Review billing errors
 California (Reg. IX): Palmetto (Parts A/B);
Noridian (DME)

27. MAC’S, CONTINUED
 MAC is required to review Medicare claims in
the course of processing contractor and to
analyze claims data and other information (e.g.,
complaints) to identify suspected billing
problems
 When MAC verifies that an error exists through
a review of a small sample of claims, the
contractor classifies the severity of the problem
as minor, moderate, or significant and imposes
corrective actions, e.g. pre-
payment/postpayment review

28. MEDICARE INTEGRITY PROGRAM (MIP)
 Focus:
 Detectand prevent fraud in FFS, Medicare
Advantage and Part D programs;
 Ensure integrity of FFS enrollment process;
 Promote compliance with Medicare rules.
 Includes:
 PSC‟s
 ZPIC‟s
 MAC‟s can qualify as ZPIC‟s

29. THE ZONE PROGRAM INTEGRITY CONTRACTOR
(ZPIC) AUDIT INITIATIVE
 Focus:
 Identify cases of potential fraud, waste, and abuse in
Medicare, develop them thoroughly and in a timely
manner, and take immediate action to ensure that
Medicare Trust Fund monies are not inappropriately paid
out and that any mistaken payments are recouped.
 Impose Administrative Actions
 Support federal law enforcement in the investigation
and prosecution of Medicare fraud casesThe PSCs
and the ZPICs function into Seven zones based on
MAC jurisdictions;
 California is one of five “hot spots” (also FL, IL, NY,
TX); many states still using PSC‟s

30. ZPIC ANTI-FRAUD PROCESS
 Identify program vulnerabilities
 Proactively identify incidents of potential fraud that exist within its service
area and taking appropriate action on each case
 Pursue leads through data analysis, Internet, the Fraud Investigation
Database (FID), news, etc
 Generate and/or identify leads by internal data (claims processing, data
analysis, audit and reimbursement, appeals, medical review, enrollment)
 Investigate allegations of fraud made by beneficiaries, providers, CMS,
OIG, and other sources
 Initiating appropriate administrative actions to deny or to suspend
payments that should not be made to providers where there is reliable
evidence of fraud;
 Refer cases for civil and criminal prosecution and/or application of
administrative sanctions
 Initiate and maintain educational, networking, and outreach activities to
ensure effective interaction and exchange of information with internal
components as well as outside groups;

31. ZPIC MODEL
 Replacement of program safeguard contractors
(PSC‟s) with seven zone program integrity
contractors (ZPIC‟s).
 Coordinate benefit integrity activity nationwide -
“rapid response teams with a more aggressive fraud
fighting mandate”--Kim Brandt, director of the CMS
Program Integrity Group.
 Five of the seven ZPICS will be assigned to “hot spot”
areas -California, Florida, New York, Illinois and
Texas….
 Trend reflected: resolve more fraud and abuse and
overpayment matters administratively, including
sanctions and education

32. TYPES OF COMPLAINTS REFERRED TO
PSCS/ZPICS
 Incorrect reporting of diagnoses or procedures
to maximize payments (Upcoding)
 Billing for services not furnished and/or supplies
not provided
 Billing that appears to be a deliberate
application for duplicate payment for same
services or supplies
 Misrepresenting as medically necessary,
non‐covered services by using inappropriate
procedure or diagnosis codes

33. ZPIC FOCUS
 Soliciting, offering, or receiving g, g, g a kickback, bribe, or rebate
 Unbundling or “exploding” charges
 Completing Certificates of Medical Necessity (CMN) for patients
not personally and professionally known by the provider
 Using an incorrect or inappropriate provider number in order to be
paid
 Participating in schemes involving collusion between a provider
and a beneficiary resulting in higher costs or charges to the
Program
 Altering claim forms, electronic claim records, medical
documentation, etc., to obtain a higher payment amount
 Billing based on “gang visits”
 Misrepresentations
 Billing non-covered or non-chargeable services as covered items
 Using another person's Medicare card to obtain medical caream

34. THE RECOVERY AUDIT CONTRACTOR (RAC)
AUDIT INITIATIVE
 3-year RAC Demonstration Project (CA, NY and FL, 2005-
2008) returned $992.7m in overpayments to Medicare (net
savings $693m)
 Made permanent by Section 302 of the Tax Relief and Health
Care Act of 2006 -- 50 state expansion mandated by 2010
 Expanded by PPACA (Medicaid, Part C, D) by 12.31.10 (§
6411)
 Focus: to reduce Medicare improper payments through
efficient detection and collection of overpayments,
identification of underpayments and the implementation of
actions that will prevent future improper payments
 detect and correct past improper payments so that MACs
et al. can implement actions that will prevent future

35. RAC OVERVIEW
 RACs seek to identify improper payments resulting from
 Incorrect payments;
 non-covered services (e.g. no medical necessity)
 incorrectly coded services
 duplicate services
 Methods of RAC review:
 automated review (claims data without records; based on certainty
that overpayment occurred)
 Complex review (medical record review based on high probability of
overpayment)
 No random review
 RAC‟s charged with “targeted review”: using proprietary “data
analysis techniques” to determine claims likely to contain
overpayments
Medicare Prescription Drug, Improvement, and Modernization Act of
2003, § 935)

36. RAC MODIFICATION FROM DEMONSTRATION
PROGRAM TO PERMANENT PROGRAM
Reviewer
Look-Back Period RAC Fees
Qualifications
Demo: reopen claims Demo: No
up to 4 yrs following physician medical Demo: contingent fee
the date of initial directors or (avg >14%) based on
payment (criticized as qualification 1st stage appeal
violative of SSA requirements for decision, even if later
overturned (AMA: “a
“provider without fault” reviewers
Permanent: bounty hunter-like
provisions) Mandatory program”)
employment of
contractor physician Permanent: RAC gets
Permanent: Claims med. directors no contingency fee and
(CMD); medical must repay CMS the
reopened only up to amount it received If
three years following necessity
determinations by RN provider appeals and
date of initial payment or therapist; coding prevails at any level.
review by certified Fee capped 9-12.5%
coders

37. RAC FOCUS
 California: HealthDataInsights, Inc. (HDI),
Recovery Audit Contractor Region D
 List of specific new issues approved by CMS
for review:
http://racinfo.healthdatainsights.com
 Examples of issues
 Pharmacy Supply and Dispensing Fees
 Wheelchair Bundling
 Untimed Codes

38. PPACA: RELEVANT DEVELOPMENTS
 Increased Grounds for Exclusion/Suspension/CMP‟s
 Increased funding for health care fraud and abuse control
programs and enforcement
 Increased screening/scrutiny of enrollment applications
 Broadened disclosure requirements, e.g. beginning
3.23.2011, applicants for enrollment or revalidation of
enrollment must disclose current or previous affiliations
with any provider or supplier who has:
 Uncollected debt
 Payment suspended
 Been Excluded from federal health care programs
 Had Billing Privileges Revoked
 State Medicaid agencies required to terminate participation of any
individual or entity if participation in Medicare or any other state‟s
Medicaid program te

39. PPACA: NEW DATA COLLECTION/SHARING
 CMS required to integrate data repository to
include claims from all programs, including
Medi-Medi, VA, etc., to match HHS data in
fighting Medicare and Medicaid fraud (§ 6402)
 New national health care fraud and abuse data
collection program of certain adverse events (§
6403)
 OIG and Attorney General given access to HHS
and HHS contractor claims and payment data to
conduct law enforcement and oversight
activities

40. CMS PROPOSED RULE CMS-6028-P (9.23.10)
 Medicare, Medicaid, and CHIP; Additional Screening Requirements,
Application Fees, Temporary Enrollment Moratoria, Payment
Suspensions and Compliance Plans for Providers and Suppliers:
 Establishes requirements for suspending payments to providers and
suppliers based on credible allegations of Medicare and Medicaid
fraud;
 Establishes authority for temporary moratoria on enrollment on
providers and suppliers when necessary to help prevent or fight
fraud, waste, and abuse without impeding beneficiaries‟ access to
care.
 Strengthens provider enrollment and screening procedures to more
accurately assure that fraudulent providers are not gaming the
system and that only qualified providers/suppliers are allowed to
enroll/bill;
 Outlines req‟t for states to terminate providers from Medicaid/CHIP
when terminated by Medicare, other state Medicaid /CHIP;
 Solicits input on how to best structure and develop mandatory

41. NEW CMS CENTER FOR PROGRAM INTEGRITY
(CPI) (SEPT. 2010)
 Newly created to serve as CMS focal point for all national and State-wide Medicare
and Medicaid programs and CHIP integrity fraud and abuse issues.
 Focus
 Promoting integrity of the Medicare and Medicaid programs and CHIP through
provider/contractor audits and policy reviews, identification and monitoring of
program vulnerabilities, and providing support and assistance to States.
Recommends modifications to programs and operations as necessary and works
with CMS Centers, Offices, and the Chief Operating Officer (COO) to affect
changes as appropriate.
 Collaborate with the Office of Legislation on the development and advancement
of new legislative initiatives and improvements to deter, reduce, and eliminate
fraud, waste and abuse.
 Oversees all CMS interactions and collaboration with key stakeholders relating to
program integrity (i.e., U.S. Department of Justice, DHHS Office of Inspector
General, State law enforcement agencies, other Federal entities, CMS
components) for the purposes of detecting, deterring, monitoring and combating
fraud and abuse, as well as taking action against those that commit or participate
in fraudulent or other unlawful activities.
 Develop and implement a comprehensive strategic plan, objectives and
measures to carry out CMS' Medicare, Medicaid and CHIP program integrity
mission and goals, and ensure program vulnerabilities are identified and
resolved.

42. TRENDS IN FRAUD PREVENTION
 Tighter enrollment review
 Increased education of providers and
beneficiaries;
 Early detection (medical review, data
analysis)
 Enhanced data collection and information
sharing
 Increased coordination between agencies,
contractors, and law enforcement

43. GAO IDENTIFIED PRIORITIES/STRATEGY FOR
COMBATTING MEDI/MEDI FRAUD (JUNE 2010)
 1. Strengthening provider enrollment process and standards.
 Provider background checks pre-enrollmt - identify bad actors, esp. vulnerable
areas
 2. Improving pre-payment review of claims.
 ensure that Medicare pays correctly the the outset via additional automated pre-
payment claim review
 3. Focusing post-payment claims review on most vulnerable areas.
 More post- payment reviews identify payment errors and recoup overpayments.
 More targeting of most vulnerable areas.
 4. Improving oversight of contractors.
 Expanded oversight of contractors‟ activities to address fraud, waste, and abuse
 Criticized CMS oversight of prescription drug plan sponsors‟ compliance
programs
 5. Developing a robust process for addressing identified vulnerabilities.
 Insufficient CMS process to ensure prompt resolution of identified vulnerabilities
 Need for new mechanisms in place to resolve emerging improper payment areas
Testimony of GAO Director of Healthcare Kathleen King

44. TRENDS: DATA MINING CAPACITY
 Increasingly robust capacity to analyze and leverage
data internally and across programs/contractors
 Provider data-analysis tools and data-analysis
methods for Medicare and Medicaid fraud and-abuse
detection
 CMS‟s One PI (One Program Integrity System Integrator)
- Medi-Medi integration: perceived success
 MMIS (Medicaid Management Information System) –
master claims database
 regional office reviews subset of the MMIS database,
reviews to identify algorithms, identifies potential
Medicaid claims problems, pulls the provider number,
notifies state

45. TRENDS: DATA REVIEW
 Encounter data use to detect fraud and
abuse.
 Data Pattern detection:
 Service provider and recipient identifiers
 Procedure codes
 Product and service descriptions
 Provider payment
 Data Mapping: identify referral relationships
(Stark/AKS Tool)

46. TRENDS: JOINT INVESTIGATIONS
 DRA (2005) included funds for Medi-Medi coordination in
detecting improper billing and utilization patterns by matching
Medicare and Medicaid claims information on providers and
beneficiaries to reduce fraudulent schemes that cross program
boundaries.
 Also: coordination of actions by CMS, State agencies, the Attorney
General, and the HHS OIG to protect Medicaid and Medicare
expenditures
 HHS/DOJ Health Care Fraud Prevention and Enforcement
(HEAT) (2009)
 Cabinet-level joint task force consisting of senior level leadership
from both departments under leadership of HHS Secretary Sebelius
and Attorney General
 Took over Medicare Strike Force teams--inaugurated in Miami (2007)
” now teams in Los Angeles, Houston, Detroit, Brooklyn, Tampa and
Baton Rouge
 500+ health care fraud criminal indictments to date

47. CONCLUDING THOUGHTS
 Increasing levels of
 funding for Medi/Medi fraud enforcement
 scrutiny of enrollment applications, claims data
 data sharing
 inter-agency coordination (Medi-Medi and
enforcement-oversight) and collaboration
 Increasing risk of sanctions
 Increasing overlap (decreasing demarcation)
between federal and state responsibilities

48. QUESTIONS
 Vince Blackburn –
vince.blackburn@dhcs.ca.gov
 Harry Nelson –
harry@fentonnelson.com