Blog Post

New OIG Final Rule Regarding State Medicaid Fraud Control Units

Richard P. Kusserow | April 2019

The Department of Health and Human Services (HHS) Office of Inspector General (OIG) has released a final rule to align the regulations that govern Medicaid Fraud Control Units (MFCU) with current statutory and regulatory requirements, and OIG and CMS policies. One of the OIG’s objectives for this rule change is to reduce burdens on MFCUs.  MFCUs investigate and prosecute Medicaid provider fraud, as well as patient abuse or neglect in health care facilities and board and care facilities. MFCUs operate in 49 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Medicaid represents about 17% of the $3.3 trillion annual national health care expenditures. Each of the MFCUs receive federal reimbursement equivalent to 90%, and then after three years down to 75% of its total expenditures, with the state funds conjuring the remaining 25%. In 2018, the total expenditures for supporting these units was slightly over $290 million, but resulted in over 1,500 criminal convictions, 810 civil judgments and settlements, and about $859 million in recoveries. MFCUs are usually part of the State Attorney General’s office and employ teams of investigators, attorneys, and auditors. Additionally, the units constitute a single, identifiable entity, and must be separate and distinct from the state Medicaid agency. OIG exercises oversight for the MFCUs, annually recertifies each MFCU, assesses each MFCU’s performance and compliance with federal requirements, and administers a federal grant award to fund a portion of each MFCU’s operational costs.

Alexis Rose, JD, followed the rule development and explained that it incorporates statutory, regulatory, and policy changes that have occurred since 1978, when the original regulations regarding MFCUs were issued. The final rule covers a range of issues, including federal funds matching, Medicaid state plan requirements, operational requirements, OIG approval requirements for investigating Medicaid fraud, and authority to investigate patient abuse or neglect regardless of the payor source. In reviewing the new rule, Ms. Rose found that most of the changes were not material and only incorporated the original statutory standards going back to the initial statutory effective date. The new rule addressed:

  1. OIG’s authority for oversight of compliance, certification, and recertifications of MFCUs;
  2. Updates of key terms, staffing, recertification, organization, and prosecutorial authority requirements;
  3. Duties and responsibilities of MFCUs as they apply to their reporting relationship with the OIG;
  4. Disallowance procedures;
  5. Requirements for MFCUs to establish communication and coordination procedures with the state Medicaid agency and referral procedures from managed care organizations; and
  6. When MFCUs can receive federal funding for data mining efforts.

For more information on this subject, please contact Alexis Rose at (703) 535-1456 or [email protected].

About the Author

Richard P. Kusserow established Strategic Management Services, LLC, after retiring from being the DHHS Inspector General, and has assisted over 3,000 health care organizations and entities in developing, implementing and assessing compliance programs.

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