Attention Medicaid Providers

ALBANY, NY (09/20/2007)(readMedia)-- Recently, the County of Albany announced that it would be taking a very close look at the billing activity of 23 of its Medicaid providers. Historically, such audits were performed only by New York State agencies, such as the Department of Social Services and, since the mid-1990’s, the Department of Health, as well as the State Attorney General’s Office. Additionally, Medicaid audits were few and far between. Clearly, the times are changing. What has happened?

Since they foot the bill for Medicaid services, governments at all levels (federal, state, and county) have dramatically increased their efforts to police the Medicaid program. Generally speaking, of every $1 spent on Medicaid in New York (and there are over $46 billion such dollars spent here every year), the federal government pays 50 cents, the State pays 25 cents, and the county responsible for the Medicaid recipient pays 25 cents. Typically, county Medicaid expenditures are by far the largest part of a county’s budget, and rising property taxes are an epidemic throughout the state.

The escalating costs of health care, allegations of widespread fraud and abuse by Medicaid providers, concern about the state’s ability to adequately monitor the approximately one million Medicaid claims that are filed each day in New York, and pressure from the federal government (see below) have all led to dramatic changes in how New York’s Medicaid program operates. One such change is the assumption of the Medicaid enforcement role by 12 counties (Albany, Rensselaer, Dutchess, Orange, Broome, Chautauqua, Erie, Monroe, Nassau, Rockland, Suffolk, and Westchester) and the five boroughs of New York City.

The state has authorized these participating counties and New York City to conduct audits and investigations of Medicaid providers. The participants may either utilize their own staffs or hire outside firms to do the work. There is no net cost to the participants for these audits and investigations, which are subsidized by the federal and state governments. They are conducted under the supervision of the Office of the Medicaid Inspector General (the OMIG).

Former Governor Pataki created the OMIG in August 2005 in the wake of widespread public concern about Medicaid fraud, waste and abuse due in part to a series of New York Times articles that revealed shocking examples of Medicaid malfeasance. The Times estimated that 10% to 40% of New York’s overall Medicaid expenditures were fraudulent, wasteful and/or abusive. As a result of these articles, the federal government conducted a review of New York’s Medicaid program. Its conclusion was that New York needed to make significant changes in the way it does business in pursuing Medicaid fraud, waste and abuse so that it could increase accountability and recover more misspent funds.

Due to the commitment of former Governor Pataki, Governor Spitzer, and the Legislature to dramatically increase the recovery of Medicaid overpayments, the OMIG has experienced a significant increase in staff and resources. Last year’s State budget approved a staffing increase of 81 new positions, 73 of which are auditors. This year’s budget authorized an additional increase in OMIG staff of 157 people, 100 of which will be auditors, and 57 other staff, which include computer data analysts. These specialists analyze billing patterns and statistics utilizing sophisticated computer software programs to identify potential targets for audit and investigation.

This increase in state resources, together with the empowerment of the participating counties and New York City, will mean a significant increase in the number of Medicaid providers that will be audited and investigated. Many provider types that have not historically been the subject of an audit or investigation will likely be extensively scrutinized.

New York has an additional financial incentive to succeed in its goal of dramatically increasing its recoveries of misspent Medicaid funds. New York State and the federal government have formed a partnership, the Federal/State Health Reform Partnership (“F-SHRP”), which qualifies New York to receive up to $1.5 billion in federal funding over a five-year period to help reform its health care system. However, as a condition of the receipt of these funds, New York must attain various milestones of Medicaid fraud and abuse cost recoveries. These milestones are in the hundreds of millions of dollars. If New York fails to attain any of these milestones, it must pay a penalty to the federal government of up to $500 million.

In addition to the OMIG and the 12 counties and New York City, the Medicaid Fraud Control Unit of the Attorney General’s Office (the MFCU) is a well-established player in the war on Medicaid fraud, waste and abuse. In addition to conducting conventional audits, the MFCU has criminal jurisdiction and may prosecute individuals and corporations in criminal courts throughout the state.

Along with the state, the federal government is also increasing its oversight activities and has established a nationwide Medicaid Integrity Program (the MIP), which will employ contractors and at least 100 federal employees. Since New York consumes more of the Medicaid pie than any other state, the MIP’s focus on New York is inevitable.

Earlier this year, New York enacted a False Claims Act (the FCA), which empowers private individuals (often employees of providers or so-called “whistleblowers”) to sue Medicaid and other health care providers for submitting false or fraudulent claims for payment to the government. The New York State Attorney General may also sue providers directly under the FCA. The consequences for violations of the FCA are dire and include paying back three times the amount wrongfully obtained from the government, paying a penalty of a minimum of $6,000 to $12,000 for each claim (regardless of the amount of the claim itself, even if the claim was for only $1), and the payment of attorneys’ fees and costs incurred by the whistleblower and/or the Attorney General’s Office.

Federal law, which will be operative in New York on October 1, 2007, requires that Medicaid providers that bill or order Medicaid goods and services totaling more than $5 million per year certify that they have provided education to their employees and contractors about the FCA and other laws relating to fraud, waste and abuse. As a result of a change in state law, large numbers of Medicaid providers will be required to have compliance plans, which are a form of self-policing of business operations.

Additionally, state law has been changed to permit the state to impose vastly greater penalties for Medicaid fraud, waste and abuse. The maximum penalty is now $10,000 per claim regardless of the amount of the claim itself. If the provider has been penalized within the previous five years, the maximum penalty is now $30,000 per claim.

The current audit and investigation activity underway in Albany County is merely the beginning of the involvement of Capital District counties in Medicaid fraud, waste and abuse detection and enforcement. Elsewhere in the state, counties such as Monroe, Nassau, and Rockland are also well underway in the quest to ensure that Medicaid dollars are properly spent. New York City, the heart of the Medicaid program, is also anticipated to aggressively pursue provider audits and investigations.

With the significant increase in federal, state and local auditors and investigators, the F-SHRP milestones, and the pressures to maximize the recovery of wrongly spent Medicaid funds; the chances of providers being audited and/or investigated in New York State have never been greater. Clearly, for Medicaid providers, the times have changed.

This article is by David Ross. The writer served as Acting Medicaid Inspector General for New York State under Governors Pataki and Spitzer. Mr. Ross is now engaged in the private practice of law with the law firm of O’Connell and Aronowitz in Albany, New York. For additional information, call David Ross at 518-462-5601 ext. 3313 or e-mail him at dross@oalaw.com.