June 22, 2010

New Law Targets Medicaid Managed Care Fraud: Managed Care Organizations Need to Be Prepared to Deal With Inquiries and Fraud Investigations Likely to Follow From the New Law

Holland & Knight Alert
Michael R. Manthei

On March 9, 2010, Senator Joe Negron (R), sponsored a new Florida Senate Bill 8 (SB 8) that created a Medicaid Fraud “Strike Force” and additionally would expand the Medicaid Fraud Control Unit with the Florida Attorney General’s (AG) Office to include AG positions dedicated to investigating, detecting and prosecuting Medicaid managed care fraud. While SB 8 died in the Florida House of Representatives, the Medicaid Fraud Strike Force provisions were added to companion Florida Senate Bill 1484. This bill, with the included Strike Force provisions, was signed into law by the Florida Governor on May 28, 2010. The law takes effect on January 1, 2011. Click here to read the full text of SB 1484

Florida’s Medicaid program costs the state $16 billion per year and serves approximately 2.7 million Floridians each year. It is one of the five largest state Medicaid programs in the country. In 2009, managed care payments accounted for $2.4 billion of the total $16 billion expenditure, making it the second largest expenditure that year.

According to program administrators, Medicaid fraud committed by managed care organizations accounts for a significant portion of $2.4 billion in payments. Some estimates peg losses due to fraud at up to 10 percent of expenditures.1 This fraud inflates the premiums that Medicaid pays to managed care organizations and ultimately costs the program, and hence taxpayers, millions of dollars each year, say the bill’s sponsors.

The Act Enhances the State’s Ability to Investigate and to Prosecute Medicaid Managed Care Fraud

The new law, which is titled the “Medicaid and Public Assistance Fraud Strike Force Act” (the “Act”), codified at Section 624.35, et seq., Florida Statutes, will boost the resources that are available to the Florida Medicaid Fraud Control Unit so that they can expand their investigation and prosecution of Medicaid fraud. The Act applies both to traditional fee-for-service providers and to Medicaid managed care organizations. However, the Act significantly increases the Medicaid Fraud Control Unit’s authority to investigate and to prosecute fraud committed by managed care organizations.

According to Florida’s Attorney General, Bill McCollum, prior to the passing of the Act, Florida’s Medicaid Fraud Control Unit had had limited ability to investigate managed care organizations. Full authority to investigate these organizations was designated to the Division of Insurance Fraud within the Department of Financial Services. Under the Act, agents dedicated solely to the investigation of Medicaid managed care fraud will be co-located with the Division of Insurance Fraud, but will be under the authority of the AG.

Medicaid and Public Assistance Fraud Strike Force Created

The Act also creates the Medicaid and Public Assistance Fraud Strike Force. The Strike Force will be comprised of 11 members who will serve in an advisory capacity to Florida’s Chief Financial Officer. The Strike Force’s first organizational meeting is set for March 1, 2011. Some of the major responsibilities of the Strike Force include:

  • conducting a census of local, state and federal fraud detection efforts to discern overlapping agency missions and maximize resources
  • developing a strategic plan for preventing and prosecuting Medicaid fraud
  • enhancing multiagency efforts for collaboration in detection of fraud
  • identifying methods for innovative technology and data sharing in order to analyze fraud with speed and efficiency

Based on the new law, some of the biggest changes in the investigation of Medicaid fraud will include:

  • a well-publicized rewards program for apprehension and conviction of Medicaid fraud criminals
  • creation of a Medicaid and public assistance prosecutor in the Office of the Statewide Prosecutor
  • creation of interagency Strike Force agreements for the coordination of prevention, investigation and prosecution of Medicaid and public assistance fraud

While Florida’s AG Office recovered over $198 million in 2009, the new law should further enhance Florida’s ability to pursue managed care fraud and to recover funds.

Managed Care Organizations Required to Adopt Anti-Fraud Plans

Apart from the Strike Force, SB 1484 also creates Section 409.91212, Florida Statutes, which requires managed care plans, as defined by Section 409.920(1)(e), Florida Statutes, to adopt a very detailed anti-fraud plan. The anti-fraud plan must address the detection and prevention of overpayments, abuse, and fraud relating to the provision and payment for Medicaid services. Anti-fraud plans must be submitted to the Office of Medicaid Program Integrity.

Failure to submit a plan (or submitting non-compliant or unacceptable plans) can result in an administrative fine of $2,000 per calendar day. Moreover, the failure of a managed care plan to report to the Office of Medicaid Program Integrity all suspected or confirmed instances of provider or recipient fraud or abuse within 15 calendar days after detection can result in an administrative fine of $1,000 per calendar day after the 15th day of detection. These new self-disclosure provisions significantly increase compliance obligations and risks for managed care organizations operating in Florida.

What You Can Do

As of January 1, 2011, Medicaid managed care organizations can expect to see a significant uptick in fraud investigations and prosecutions. Being proactive is the key to making sure your organization can rebuff any allegations of fraud and abuse. The following are some measures you can take in advance of an audit or investigation.

  • Timely submit your anti-fraud plan to Office of Medicaid Program Integrity and make it part of your existing compliance program.
  • Review and revise existing compliance program provisions to ensure that they address the requirements of the new law.
  • Consider creating an audit team that is trained to be the first and primary responder to any Medicaid audit or fraud investigation.
  • Educate your provider panel about the new law and advise them of their responsibilities in the event of an audit or investigation.
  • Include specific provisions in your provider contracts requiring the maintenance of proper medical records. Poor medical and clinical documentation often leads to an inference of fraud.
  • Have a plan in place that will allow you to access medical records quickly in the event of an audit or investigation.
  • Allocate the resources necessary to conduct regular internal compliance audits.
  • Have a plan in place to make any disclosures required under the new law.


Medicaid Bill Would Make CFO The State’s Top Welfare Cop, Orlando Sentinel (March 9, 2010)

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