[Federal Register Volume 77, Number 106 (Friday, June 1, 2012)]
[Notices]
[Pages 32645-32648]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-13332]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General

[Docket Number OIG-1204-N2]


Revision of Performance Standards for State Medicaid Fraud 
Control Units

AGENCY: Office of Inspector General (OIG), Department of Health and 
Human Services (HHS).

ACTION: Notice.

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SUMMARY: This notice sets forth OIG guidance regarding standards OIG 
will apply in assessing the performance of State Medicaid Fraud Control 
Units (MFCU or Unit). These standards replace and supersede standards 
published on September 26, 1994 (59 FR 49080). OIG will apply these 
standards in certifying and recertifying each Unit and to determine if 
a Unit is effectively and efficiently carrying out its duties and 
responsibilities.

DATES: Effective Date: These standards are effective on June 1, 2012.

FOR FURTHER INFORMATION CONTACT: Richard B. Stern, OIG Office of 
Evaluation and Inspections, (202) 619-0480. Patrice S. Drew, Office of 
External Affairs, (202) 619-1368.

I. Background

    The mission of the MFCUs, as established in Federal statute, is to 
investigate and prosecute Medicaid provider fraud and patient abuse and 
neglect. The States are responsible for operation of the MFCUs and 
receive reimbursement for a percentage of their costs from the Federal 
Government. Under section 1903(a)(6) of the Social Security Act (Act), 
States are reimbursed for 90 percent of their costs for the first 3 
years of a MFCU's operation and 75 percent for subsequent years. All 
MFCUs are currently reimbursed at 75 percent of the costs of operating 
a certified MFCU.
    OIG is delegated authority under 1903(q) and 1903(a)(6) of the Act 
to certify and annually recertify Units as eligible for Federal 
Financial Participation (FFP), and to reimburse States for costs 
incurred in operating a MFCU. Through the certification and 
recertification process, OIG ensures that the Units meet the 
requirements for FFP set forth in section 1903(q) of the Act and in 
Federal regulations found at 42 CFR part 1007. The performance 
standards set forth in this guidance document constitute the standards 
that OIG applies in determining the effectiveness of State Units in 
carrying out MFCU required functions. As part of the recertification 
process, OIG reviews reports from the Units, obtains information from 
other Federal and State agencies, and conducts periodic onsite reviews.
    Under 1903(q), a MFCU must be a ``single, identifiable entity of 
the State government'' and be ``separate and distinct'' from the State 
Medicaid agency. The Unit must be an office of the State Attorney 
General's office or another State government office with statewide 
prosecutorial authority or operate under a formal arrangement with the 
State Attorney General's office. The MFCU must investigate and 
prosecute Medicaid fraud cases, according to the laws of the State in 
which with MFCU operates. Federal regulations also require MFCUs to 
enter into agreements with the State Medicaid agency to ensure the 
referral of suspected provider fraud cases.
    Under 1903(q), a MFCU must also have procedures for investigating 
and prosecuting (or referring for prosecution) allegations of patient 
abuse and neglect in Medicaid-funded facilities. A MFCU may also 
investigate and prosecute abuse and neglect in ``board and care'' 
facilities, such as assisted living facilities, even if such facilities 
do not receive Medicaid payments. Finally, 1903(q) and regulations 
require that MFCUs be composed of a team of attorneys, auditors, and 
investigators.
    Under section 1902(a)(61) of the Act, as added by Public Law 103-66 
Sec.  13625 (1994), all States must operate MFCUs unless they 
demonstrate to the Secretary of HHS that they can operate without a 
Unit. Currently, 49 States and the District of Columbia have 
established MFCUs and 1 State, North Dakota, operates without a MFCU 
after receiving permission from HHS in 1994. Under section 1902(a)(61), 
States must operate a MFCU that effectively carries out the functions 
and requirements described in 1903(q), as determined in accordance with 
standards established by the Secretary of HHS. Consistent with this 
section, this notice establishes the performance standards OIG will 
consider in determining whether State MFCUs are effectively carrying 
out their statutory functions under 1903(q).

II. OIG Development and Use of These Standards

    These standards amend and update performance standards that were 
initially published in 1994 (59 FR 49080). The standards provide 
guidance to MFCUs regarding how OIG will exercise its discretion in 
assessing a Unit's performance and, as such, do not require OIG to use 
formal notice-and-comment procedures. Nevertheless, on October 6, 2011, 
we published proposed revisions to the 1994 performance standards (76 
FR 62074) to invite MFCUs and other interested parties to review and 
comment on our approach. We received seven sets of comments, all of 
which we have carefully considered. In addition, we met with one 
commenter, the National Association of Medicaid Fraud Control Units 
(the Association), which submitted extensive comments on each of the 
standards. We accepted many of the commenters' suggestions and 
recommendations and revised the standards accordingly.
    One topic raised in comments by the Association was the use of 
statistics in assessing MFCU performance. Under the 1994 standards, 
Standard 7 stated that ``[a] Unit should have a process for monitoring 
the outcome of cases. In meeting this standard, the Unit's monitoring 
of the following case factors and outcomes will be considered 
[including numbers of arrests, convictions, overpayments, and civil

[[Page 32646]]

recoveries].'' In the 2011 proposed revision to the standards, OIG 
proposed that MFCUs design performance management systems that include 
performance goals and outcomes for case- and non-case work. The 
Association objected strongly to the draft standard, both because the 
development of performance management systems could be seen as a new 
mandate for many MFCUs as well as a perception that OIG was relying too 
heavily on statistical measures for assessing performance.
    We agree with the Association that an exclusive reliance on case 
outcomes in evaluating performance is not appropriate for the Units. 
However, we also believe that the 1994 version of Standard 7 did not 
provide OIG an effective means to evaluate performance without further 
guidance on how MFCUs would systematically monitor outcomes. We have 
therefore eliminated a separate standard for the monitoring of case 
outcomes and have combined elements of the proposed standard with new 
Standard 7, ``Maintaining Case Information.''
    While they are not included in these standards, we continue to 
believe that MFCUs, as an effective practice, should consider 
developing management systems or processes for monitoring and measuring 
the outcome of cases, for the purpose of improving performance. One way 
to accomplish this would be for MFCUs to monitor and measure the 
timeliness of their handling of key stages of the process or of similar 
types of cases. For example, a MFCU could review and monitor the length 
of time between the receipt of a referral and when the matter is 
accepted or declined for investigation. Another approach would be to 
monitor and measure the time spent in investigating a particular type 
of provider, such as pharmacies.
    We believe that, in addition to monitoring and measuring of case 
outcomes, the Units should consider monitoring their own engagement in 
non-case activities that would improve performance. These activities 
may include, for example, training and outreach designed to increase 
referrals of fraud and patient abuse and neglect; liaison with program 
integrity staff, managed care organizations, and other law enforcement 
agencies to increase fraud referrals; and liaison on patient abuse and 
neglect matters with licensing and certification agencies, the State 
Long Term Care Ombudsman, or adult protective services offices.
    As noted by the Association, OIG, consistent with Performance 
Standard 7, reviews statistical information provided by the MFCUs both 
for the purpose of analyzing MFCU operations and to provide information 
to the public about MFCU activities. In doing so, we emphasize that OIG 
does not intend that MFCUs be evaluated solely on the basis of 
statistical information. MFCUs are subject to various legal authorities 
and organizational constraints and, therefore, comparisons between two 
or more MFCUs based on statistical outcomes should be undertaken with 
caution.
    Consistent with OIG's reliance on a variety of information sources 
in assessing performance, the performance standards themselves are an 
important oversight tool that aids OIG in assessing information on each 
of the topic areas covered by the standards. This information is 
important in recertifying the MFCUs and in evaluating whether a MFCU is 
operating effectively.
    When OIG determines that a MFCU is deficient in meeting one or more 
standards, OIG will provide technical assistance or make 
recommendations for improvement. Ultimately, a Unit that continues to 
operate in an ineffective manner could be designated as a high-risk 
grantee and OIG may make a separate determination regarding the Unit's 
certification status under section 1903(q).
    The revised standards, reflecting public comments, are set forth 
below. These standards may be further revised in future years based on 
experience gained in the oversight of the Units.

III. Standards for Assessing MFCU Performance

Performance Standard 1--Compliance With Requirements

    A Unit conforms with all applicable statutes, regulations, and 
policy directives, including:
    A. Section 1903(q) of the Social Security Act, containing the basic 
requirements for operation of a MFCU;
    B. Regulations for operation of a MFCU contained in 42 CFR part 
1007;
    C. Grant administration requirements at 45 CFR part 92 and Federal 
cost principles at 2 CFR part 225;
    D. OIG policy transmittals as maintained on the OIG Web site; and
    E. Terms and conditions of the notice of the grant award.

Performance Standard 2--Staffing

    A Unit maintains reasonable staff levels and office locations in 
relation to the State's Medicaid program expenditures and in accordance 
with staffing allocations approved in its budget. To determine whether 
a Unit meets this standard, OIG will consider the following performance 
indicators:
    A. The Unit employs the number of staff that is included in the 
Unit's budget estimate as approved by OIG.
    B. The Unit employs a total number of professional staff that is 
commensurate with the State's total Medicaid program expenditures and 
that enables the Unit to effectively investigate and prosecute (or 
refer for prosecution) an appropriate volume of case referrals and 
workload for both Medicaid fraud and patient abuse and neglect.
    C. The Unit employs an appropriate mix and number of attorneys, 
auditors, investigators, and other professional staff that is both 
commensurate with the State's total Medicaid program expenditures and 
that allows the Unit to effectively investigate and prosecute (or refer 
for prosecution) an appropriate volume of case referrals and workload 
for both Medicaid fraud and patient abuse and neglect.
    D. The Unit employs a number of support staff in relation to its 
overall size that allows the Unit to operate effectively.
    E. To the extent that a Unit maintains multiple office locations, 
such locations are distributed throughout the State, and are adequately 
staffed, commensurate with the volume of case referrals and workload 
for each location.

Performance Standard 3--Policies and Procedures

    A Unit establishes written policies and procedures for its 
operations and ensures that staff are familiar with, and adhere to, 
policies and procedures. To determine whether a Unit meets this 
standard, OIG will consider the following performance indicators:
    A. The Unit has written guidelines or manuals that contain current 
policies and procedures, consistent with these performance standards, 
for the investigation and (for those Units with prosecutorial 
authority) prosecution of Medicaid fraud and patient abuse and neglect.
    B. The Unit adheres to current policies and procedures in its 
operations.
    C. Procedures include a process for referring cases, when 
appropriate, to Federal and State agencies. Referrals to State 
agencies, including the State Medicaid agency, should identify whether 
further investigation or other administrative action is warranted, such 
as the collection of overpayments or suspension of payments.
    D. Written guidelines and manuals are readily available to all Unit 
staff, either online or in hard copy.
    E. Policies and procedures address training standards for Unit 
employees.

[[Page 32647]]

Performance Standard 4--Maintaining Adequate Referrals

    A Unit takes steps to maintain an adequate volume and quality of 
referrals from the State Medicaid agency and other sources. To 
determine whether a Unit meets this standard, OIG will consider the 
following performance indicators:
    A. The Unit takes steps, such as the development of operational 
protocols, to ensure that the State Medicaid agency, managed care 
organizations, and other agencies refer to the Unit all suspected 
provider fraud cases. Consistent with 42 CFR 1007.9(g), the Unit 
provides timely written notice to the State Medicaid agency when 
referred cases are accepted or declined for investigation.
    B. The Unit provides periodic feedback to the State Medicaid agency 
and other referral sources on the adequacy of both the volume and 
quality of its referrals.
    C. The Unit provides timely information to the State Medicaid or 
other agency when the Medicaid or other agency requests information on 
the status of MFCU investigations, including when the Medicaid agency 
requests quarterly certification pursuant to 42 CFR 455.23(d)(3)(ii).
    D. For those States in which the Unit has original jurisdiction to 
investigate or prosecute patient abuse and neglect cases, the Unit 
takes steps, such as the development of operational protocols, to 
ensure that pertinent agencies refer such cases to the Unit, consistent 
with patient confidentiality and consent. Pertinent agencies vary by 
State but may include licensing and certification agencies, the State 
Long Term Care Ombudsman, and adult protective services offices.
    E. The Unit provides timely information, when requested, to those 
agencies identified in (D) above regarding the status of referrals.
    F. The Unit takes steps, through public outreach or other means, to 
encourage the public to refer cases to the Unit.

Performance Standard 5--Maintaining a Continuous Case Flow

    A Unit takes steps to maintain a continuous case flow and to 
complete cases in an appropriate timeframe based on the complexity of 
the cases. To determine whether a Unit meets this standard, OIG will 
consider the following performance indicators:
    A. Each stage of an investigation and prosecution is completed in 
an appropriate timeframe.
    B. Supervisors approve the opening and closing of all 
investigations and review the progress of cases and take action as 
necessary to ensure that each stage of an investigation and prosecution 
is completed in an appropriate timeframe.
    C. Delays to investigations and prosecutions are limited to 
situations imposed by resource constraints or other exigencies.

Performance Standard 6--Case Mix

    A Unit's case mix, as practicable, covers all significant provider 
types and includes a balance of fraud and, where appropriate, patient 
abuse and neglect cases. To determine whether a Unit meets this 
standard, OIG will consider the following performance indicators:
    A. The Unit seeks to have a mix of cases from all significant 
provider types in the State.
    B. For those States that rely substantially on managed care 
entities for the provision of Medicaid services, the Unit includes a 
commensurate number of managed care cases in its mix of cases.
    C. The Unit seeks to allocate resources among provider types based 
on levels of Medicaid expenditures or other risk factors. Special Unit 
initiatives may focus on specific provider types.
    D. As part of its case mix, the Unit maintains a balance of fraud 
and patient abuse and neglect cases for those States in which the Unit 
has original jurisdiction to investigate or prosecute patient abuse and 
neglect cases.
    E. As part of its case mix, the Unit seeks to maintain, consistent 
with its legal authorities, a balance of criminal and civil fraud 
cases.

Performance Standard 7--Maintaining Case Information

    A Unit maintains case files in an effective manner and develops a 
case management system that allows efficient access to case information 
and other performance data. To determine whether a Unit meets this 
standard, OIG will consider the following performance indicators:
    A. Reviews by supervisors are conducted periodically, consistent 
with MFCU policies and procedures, and are noted in the case file.
    B. Case files include all relevant facts and information and 
justify the opening and closing of the cases.
    C. Significant documents, such as charging documents and settlement 
agreements, are included in the file.
    D. Interview summaries are written promptly, as defined by the 
Unit's policies and procedures.
    E. The Unit has an information management system that manages and 
tracks case information from initiation to resolution.
    F. The Unit has an information management system that allows for 
the monitoring and reporting of case information, including the 
following:
    1. The number of cases opened and closed and the reason that cases 
are closed.
    2. The length of time taken to determine whether to open a case 
referred by the State Medicaid agency or other referring source.
    3. The number, age, and types of cases in the Unit's inventory/
docket.
    4. The number of referrals received by the Unit and the number of 
referrals by the Unit to other agencies.
    5. The dollar amount of overpayments identified.
    6. The number of cases criminally prosecuted by the Unit or 
referred to others for prosecution, the number of individuals or 
entities charged, and the number of pending prosecutions.
    7. The number of criminal convictions and the number of civil 
judgments.
    8. The dollar amount of fines, penalties, and restitution ordered 
in a criminal case and the dollar amount of recoveries and the types of 
relief obtained through civil judgments or prefiling settlements.

Performance Standard 8--Cooperation With Federal Authorities on Fraud 
Cases

    A Unit cooperates with OIG and other Federal agencies in the 
investigation and prosecution of Medicaid and other health care fraud. 
To determine whether a Unit meets this standard, OIG will consider the 
following performance indicators:
    A. The Unit communicates on a regular basis with OIG and other 
Federal agencies investigating or prosecuting health care fraud in the 
State.
    B. The Unit cooperates and, as appropriate, coordinates with OIG's 
Office of Investigations and other Federal agencies on cases being 
pursued jointly, cases involving the same suspects or allegations, and 
cases that have been referred to the Unit by OIG or another Federal 
agency.
    C. The Unit makes available, to the extent authorized by law and 
upon request by Federal investigators and prosecutors, all information 
in its possession concerning provider fraud or fraud in the 
administration of the Medicaid program.
    D. For cases that require the granting of ``extended jurisdiction'' 
to investigate Medicare or other Federal health care fraud, the Unit 
seeks permission from OIG or other relevant agencies under procedures 
as set by those agencies.
    E. For cases that have civil fraud potential, the Unit investigates 
and

[[Page 32648]]

prosecutes such cases under State authority or refers such cases to OIG 
or the U.S. Department of Justice.
    F. The Unit transmits to OIG, for purposes of program exclusions 
under section 1128 of the Social Security Act, all pertinent 
information on MFCU convictions within 30 days of sentencing, including 
charging documents, plea agreements, and sentencing orders.
    G. The Unit reports qualifying cases to the Healthcare Integrity & 
Protection Databank, the National Practitioner Data Bank, or successor 
data bases.

Performance Standard 9--Program Recommendations

    A Unit makes statutory or programmatic recommendations, when 
warranted, to the State government. To determine whether a Unit meets 
this standard, OIG will consider the following performance indicators:
    A. The Unit, when warranted and appropriate, makes statutory 
recommendations to the State legislature to improve the operation of 
the Unit, including amendments to the enforcement provisions of the 
State code.
    B. The Unit, when warranted and appropriate, makes other regulatory 
or administrative recommendations regarding program integrity issues to 
the State Medicaid agency and to other agencies responsible for 
Medicaid operations or funding. The Unit monitors actions taken by the 
State legislature and the State Medicaid or other agencies in response 
to recommendations.

Performance Standard 10--Agreement With Medicaid Agency

    A Unit periodically reviews its Memorandum of Understanding (MOU) 
with the State Medicaid agency to ensure that it reflects current 
practice, policy, and legal requirements. To determine whether a Unit 
meets this standard, OIG will consider the following performance 
indicators:
    A. The MFCU documents that it has reviewed the MOU at least every 5 
years, and has renegotiated the MOU as necessary, to ensure that it 
reflects current practice, policy, and legal requirements.
    B. The MOU meets current Federal legal requirements as contained in 
law or regulation, including 42 CFR 455.21, ``Cooperation with State 
Medicaid fraud control units,'' and 42 CFR 455.23, ``Suspension of 
payments in cases of fraud.''
    C. The MOU is consistent with current Federal and State policy, 
including any policies issued by OIG or the Centers for Medicare & 
Medicaid Services (CMS).
    D. Consistent with Performance Standard 4, the MOU establishes a 
process to ensure the receipt of an adequate volume and quality of 
referrals to the Unit from the State Medicaid agency.
    E. The MOU incorporates by reference the CMS Performance Standard 
for Referrals of Suspected Fraud From a State Agency to a Medicaid 
Fraud Control Unit.

Performance Standard 11--Fiscal Control

    A Unit exercises proper fiscal control over Unit resources. To 
determine whether a Unit meets this standard, OIG will consider the 
following performance indicators:
    A. The Unit promptly submits to OIG its preliminary budget 
estimates, proposed budget, and Federal financial expenditure reports.
    B. The Unit maintains an equipment inventory that is updated 
regularly to reflect all property under the Unit's control.
    C. The Unit maintains an effective time and attendance system and 
personnel activity records.
    D. The Unit applies generally accepted accounting principles in its 
control of Unit funding.
    E. The Unit employs a financial system in compliance with the 
standards for financial management systems contained in 45 CFR 92.20.

Performance Standard 12--Training

    A Unit conducts training that aids in the mission of the Unit. To 
determine whether a Unit meets this standard, OIG will consider the 
following performance indicators:
    A. The Unit maintains a training plan for each professional 
discipline that includes an annual minimum number of training hours and 
that is at least as stringent as required for professional 
certification.
    B. The Unit ensures that professional staff comply with their 
training plans and maintain records of their staff's compliance.
    C. Professional certifications are maintained for all staff, 
including those that fulfill continuing education requirements.
    D. The Unit participates in MFCU-related training, including 
training offered by OIG and other MFCUs, as such training is available 
and as funding permits.
    E. The Unit participates in cross-training with the fraud detection 
staff of the State Medicaid agency. As part of such training, Unit 
staff provide training on the elements of successful fraud referrals 
and receive training on the role and responsibilities of the State 
Medicaid agency.

    Dated: May 29, 2012.
Daniel R. Levinson,
Inspector General.
[FR Doc. 2012-13332 Filed 5-31-12; 8:45 am]
BILLING CODE 4152-01-P