The Department of Health and Human Services (HHS) Office of Inspector General (OIG) recently released an Annual Report (Report) for Fiscal Year (FY) 2018 regarding Medicaid Fraud Control Units (MFCU). MFCUs are entities tasked with the investigation and prosecution of Medicaid provider fraud and patient abuse or neglect. Federal and state governments jointly fund MFCUs. The OIG is the federal agency responsible for the oversight and annual approval of federal funding for MFCUs to reduce Medicaid fraud through a recertification process.
To recertify a MFCU, the OIG: 1) assesses the MFCU’s compliance with federal requirements for MFCUs contained in statute, regulations, and OIG policy transmittals; 2) examines the MFCU’s adherence to twelve performance standards, including but not limited to, staffing, maintaining adequate referrals, and cooperating with federal authorities; 3) conducts periodic onsite reviews of MFCUs; 4) provides ongoing technical assistance and guidance to MFCUs; and 4) collects and presents statistical data that each MFCU has reported. The Report analyzes the annual statistical data on case outcomes, including, civil settlements and judgments, convictions and recoveries, and recertification materials that the 50 MFCUs submitted to the OIG for FY 2018. In addition, the Report examines the OIG’s exclusions data.
The OIG found the following regarding case outcomes:
Number of Convictions Remain Similar to Recent Years
For the past five years, fraud convictions have accounted for about 73 percent of all convictions. In FY 2018, there were 1,503 MFCU convictions, which included 1,109 for fraud and 394 for patient abuse or neglect. From the 1,109 fraud convictions, 496 involved personal care services attendants and agencies, a significantly higher number than any other provider type in FY 2018. FYs 2015-2018 demonstrated similar numbers for fraud convictions with outcomes ranging between 1,500 and 1,570 convictions each year. MFCUs provide the OIG with conviction referrals regarding convictions in their respective states for the OIG to exclude those individuals and entities from federally funded health care programs, under its exclusion authority. In FY 2018, as a result of MFCU conviction referrals, the OIG excluded 974 individuals and entities from participating in federal health care programs. Further, in FY 2018, convictions from drug diversion cases increased to 199, from 191 in FY 2017. Drug diversion cases, in the Medicaid context, involved the investigation of fraudulent billing of Medicaid for drugs diverted from legal and medically necessary uses. These convictions resulted in recoveries of $7.7 million in FY 2018.
Criminal Recoveries Return to Same General Level that Existed Prior to Spike Last Year
In FY 2018, there were criminal recoveries of $314 million, a decrease below the average of $400 million for FYs 2014-2018 and a significant drop from about $700 million in FY 2017. However, the OIG identifies that the spike in FY 2017 was due to a criminal recovery amount of $268 million from a single large fraud case.
Number of Civil Settlements and Judgments Decline for Second Year in a Row
In FY 2018, there were 810 civil settlements and judgments resulting from MFCU actions, 217 of which involved pharmaceutical manufacturers. Pharmaceutical manufacturers represented the highest civil settlements and judgments from any other provider type in FY 2018. The number of civil settlements and judgments for FY 2018 represents the second year of decline in a row and is below the average number of 888 civil settlements and judgments for FYs 2014-2018.
Civil Recoveries Decline for Second Straight Year
Civil recoveries in FY 2018 decreased to $545 million from the average of $1 billion for FYs 2014-2018 and over $1 billion in FY 2016 and 2017. From the $545 million, $367 million were derived from global cases, cases involving both the federal government and a group of states, and coordinated by the National Association of Medicaid Fraud Control Units (NAMFCU). For example, one global case involved a dental management company and its affiliated dental clinics. The entity was ordered to pay the U.S. and participating states $23.9 million to resolve allegations that it had knowingly submitted false claims for payment to State Medicaid programs for medically unnecessary dental services performed on Medicaid insured children. The remaining $178 million in civil recoveries were derived from nonglobal cases, cases conducted by Units individually or with other law enforcement partners, and not coordinated by the NAMFCU. For example, a nonglobal case that the Alaska Unit investigated involved a health care agency that provided services to persons with intellectual or developmental disabilities. The agency agreed to pay $2.3 million to resolve allegations that it billed for services not provided. In addition, the agency entered a five-year Corporate Integrity Agreement with the OIG to help prevent future instances of fraud and abuse, as part of its settlement agreement.
Further, the Centers for Medicare & Medicaid Services (CMS) and OIG recently released a Final Rule (Rule) to align regulations that govern MFCUs with statutory and regulatory requirements. The Rule was implemented to address statutory, policy and practice changes that affect MFCUs and have occurred since the regulation was first issued in 1978. The Rule is intended to: 1) assist MFCUs with understanding their authorities and responsibilities under the grant program; 2) clarify MFCUs’ flexibilities in operating their programs; and 3) reduce administrative burden. The changes in the Rule include the following:
- Recognition of the OIG’s delegated authority;
- Definition of terms;
- MFCU authority, functions, and responsibilities;
- Disallowances; and
- Issues related to organization, prosecutorial authority, staffing, recertification and the MFCUs’ relationship with Medicaid agencies.
The OIG Annual Report is available at:
The Final Rule is available at: