Legislature(2003 - 2004)
05/12/2003 03:25 PM House JUD
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SB 41 - MEDICAID COSTS AND CRIMES Number 1640 CHAIR McGUIRE announced that the next order of business would be CS FOR SPONSOR SUBSTITUTE FOR SENATE BILL NO. 41(FIN), "An Act relating to medical care and crimes relating to medical care, including medical care and crimes relating to the medical assistance program, catastrophic illness assistance, and medical assistance for chronic and acute medical conditions." Number 1667 SENATOR LYDA GREEN, Alaska State Legislature, sponsor, indicated that after the sponsor statement for SSSB 41 was prepared, a "Medicaid audit" was conducted by the Division of Legislative Audit. She relayed that one of the audit's recommendations was that the director of the Division of Medical Assistance (DMA) should provide for a full-time, ongoing service provider audit function. Another of the audit's recommendations was that the legislature should consider adopting specific criminal statutes related to Medicaid fraud in order to enhance the effectiveness of the Medicaid Fraud Control Unit (MFCU). She said that these two points of that audit are encompassed in SSSB 41, and that SSSB 41 has been included in the governor's "crime package legislation." SENATOR GREEN said that the cost of the Medicaid program in Alaska has increased an average of 20 percent per year since 1999, growing the program from $396 million in 1999, to $936 million in 2004 - a total increase of $540 million over five years. Were this increase due only to an increase in clients that qualify for Medicaid and/or an increase in federal requirements, it would be [acceptable]. However, according to research, there is a 7-percent waste factor in Alaska's Medicaid program. Additionally, she relayed, there are nationwide estimates of 5 to 20 percent fraud in both Medicaid and Medicare. With regard to Alaska's Medicaid program, she said, even a 5, 6, or 7 percent fraud rate can translate into 10 to 20 percent of nearly a $1 billion budget. SENATOR GREEN suggested that that money would be better spent on the people who actually need medical assistance. She made mention of a letter dated May 12, 2003, from Steve Branchflower, current director of the Office of Victims' Rights (OVR) and former director of the Alaska Medicaid Fraud Control Unit. She relayed that on page [2] of that letter, Mr. Branchflower wrote [original punctuation provided]: Alaska is the only state that has no specific health care criminal theft statutes on the books. As a result, prosecutors must use non-specific criminal statutes to prosecute healthcare professionals who operate in a highly technical field and are able to mount expensive and well-financed (and often successful) defenses. Consequently, the record shows that there have been very few prosecutions-far less than one would expect-given the hundreds of million of dollars which flow through Alaska's Medicaid program each year to less than 10,000 participating Medicaid providers. Number 1863 SENATOR GREEN recommended that members read the entire letter, adding that it contains a lot of great information that points out the need for some major reforms. Included in SSSB 41 is a requirement that the Department of Health and Social Services (DHSS) hire an outside auditor who will begin doing a regular audit process on billings and claims that come into the Medicaid program. There are also requirements that the DHSS follow up on those claims that are not prosecuted in court, and that the "entire system be much more aggressive and in tune with the purpose of the program, [which] is to provide the most medical assistance possible to the people who need it," she added. SENATOR GREEN went on to say: While we were doing the earlier writing of the bill, we found that the language actually pertained to providers; we'd unknowingly left out the recipients. And the recipient group was meeting here in Juneau, and they went to the department and they said, "We think recipients ought to be included; we know people who are abusing the system, and we want them included." And although that dollar cost is far less, the integrity of the program, as far as they were concerned, was jeopardized .... And so we have [added] the language to include recipients as well .... And ..., based on the amount of harm done by the illegal claim, the incorrect process, there's a penalty that's invoked ... If you look on to page 4, ... line 23, ... it talks about the class B felony, if [the claim] pertains to anything over $25,000, and it goes on through the different steps and it replicates ... similar penalties for other actions that are comparable. ... One of the things that also came of this is ... language that says the legislature requires the department to do the annual audit, and it is at a percentage that is .75 percent of all enrolled providers with there being no less than an annual 75 audits being done regularly, which [is] fairly aggressive .... Number 2001 SENATOR GREEN continued: There are many providers on the books who are not large users of Medicaid, so the total number could be somewhat misleading, but this would keep it in [an] area where ... we would have a good cross section of all providers who would be subject to audit and ... who would be being checked. ... There's quite a bit of recovery after a successful lawsuit. You may have read about the one in Anchorage last year [and/or] the one in Fairbanks last year. And there were several hundred thousand dollars recovered from those, from [doctors] who were doing some illegal prescribing and assisting patients in ... selling drugs on the street. And they were sort of bringing the money back in and getting new prescriptions and going back and kind of had a pretty good deal going, actually. And [this is] very harmful to our system. But the unfortunate part [is that they] were not able to prosecute on Medicaid fraud; they had to prosecute based on the crime they were committing that was parallel or coincidental to the Medicaid fraud. And certainly Steve Branchflower in his letter lays that out very clearly and far better than I. But the ... money that would be brought in under ... successful prosecutions, ... [if SSSB 41 is approved by the legislature], will go back into funding the audits. ... The department as well ... [as] myself have been concerned with some comments that these audits take too long [and] people don't get back to the person being audited, and [so] we have fully funded an additional audit position in our operating budget this year. Number 2073 SENATOR GREEN concluded: The audit firm being hired is going to have an additional function from this point forward; they will not only do the initial audit and find the suspected files, they will begin the investigation as well, freeing up our Medicaid auditors to do more of the prosecutorial work. And so we're saying that we think it's appropriate for this money to be available for appropriation to fund that function, and to certainly not keep anyone being audited in a delay status or ... [have it go] on in an unprofessional manner. The department has agreed that this is a concern to them and they intend to see these go more quickly. There are always, I assume, ... going to be people who choose to do things other than [by] the book, and we have complaints about people who will say, "This audit impacted me unfairly," but I find it very difficult that anyone could sit here and say that they think it's not appropriate for us to criminalize something that is so [incredibly expensive] for this state. And we ... - [along with] the Department of Law, the Department of Health and Social Services, and Steve Branchflower with the Office of Victims' Rights - ... worked many, many, many hours on bringing this to this condition; all have agreed that this will work for the purposes of each of the departments concerned. And with that, I welcome any questions. CHAIR McGUIRE turned attention to a document entitled "DMA notes on ASMA SB 41 comments," and indicated that this document makes reference to letters that were sent by the Alaska State Medical Association (ASMA). She said that she has heard complaints from doctors who still treat Medicaid patients that audits invade patients' privacy. She posited that some could argue that since Medicaid patients are receiving a state-funded service, there is a compelling state interest to access these records during a fraud investigation. However, there is a concern that in some of these audits, the information that has been requested goes above and beyond that Medicaid patient's record and into his/her family members' records and into the records of other, similarly situated patients. She surmised, though, that the latter might be done to determine whether a specific treatment is the normal way to treat a patient with a like condition. Chair McGuire said she had concerns about this issue and asked Senator Green whether anyone has yet addressed the legal aspects of it, particularly in light of Alaskans' constitutionally guaranteed right of privacy. Number 2273 SENATOR GREEN indicated that the department might be better able to address that issue. She added that issues of privacy change, both for providers and for recipients, when someone arranges to have another entity pay for services, although this doesn't mean that it would be proper to make such records available to the public. She opined that the state does have the right to validate claims and charges. And although she has never seen a Medicaid audit conducted, she said, one of the things that happens often is that in a class of provider, the auditors do look for similar irregularities, for example, pertaining to a particular [doctor], a particular clinic, or a particular [patient]. She remarked that it is understandable that once some person or entity comes under suspicion, the investigation would ramp up and, thus, the scope of information being sought would be expanded. CHAIR McGUIRE indicated that she still has concerns about this issue. She pointed out that in some cases, at issue is the conduct of the physician, rather than that of the patient. She then noted that another issue that has been raised by the Alaska State Medical Association is that when there are questions regarding which treatment codes to use, Medicaid officials have been less than helpful. She remarked that the DMA's response to this concern, located in the aforementioned document, is very convoluted. So to hold someone criminally liable for legitimate errors in coding is unfair, especially considering that Medicaid officials do not provide adequate responses to questions. TAPE 03-60, SIDE B Number 2385 CHAIR McGUIRE continued, "If we're going to raise the bar and apply criminal sanctions, I think we ought to be giving the medical community as many tools as we possibly can to make a good-faith effort to follow the rules and treat the patients appropriately." SENATOR GREEN mentioned that she thought there are currently some changes to the coding system occurring at the federal level, adding that these changes may alleviate some of the ASMA's concerns. She noted, however, that DMA's written response to this concern includes the statement, "It is expected that providers deliver and bill for services in the same manner as they serve the general public." Therefore, she opined, they should be using the same code for both types of patients; it should not have to be a puzzle that has to be figured out. CHAIR McGUIRE offered that even as far as serving the general public, the coding system is currently quite a quagmire. She added, "A good physician will try to assign the billing code that will offer their patient the best mode of treatment and the best possibility of coverage, all within the realm of truth." For example, a physical examination can be [coded] different ways. REPRESENTATIVE SAMUELS asked what happens to the privacy issue when audits are performed by private entities; for example, an audit performed by an insurance company. CHAIR McGUIRE said her concerns pertain to doctor-patient confidentiality in general. SENATOR GREEN said that the forms which providers are having patients sign allow information to be shared with insurance companies - those entities that are being asked to pay for the service. She said she assumes that this is also the case with Medicaid; the payor has the right to know that the service has been provided and that it is the appropriate service. Once a patient has asked a third party to pay for all or part of the service, the patient is in a different category. Number 2247 CHAIR McGUIRE said she did not disagree with that point, but added: Where my questions on the privacy issue go to are the ancillary folks that get involved when an audit is conducted. And those are the patient's relatives that may be treated by the same practitioner - ... these are experiences that come from the medical community - or possibly even an unrelated patient ... [who] is not a Medicaid recipient that is receiving care under a similar category. So those are the folks I'm concerned about. REPRESENTATIVE GARA said that he likes the bill and the concept, and he understands the motivation behind the bill. He said that he wanted to be sure that the cost of the extra audits is going to be justified by extra recoveries. He then broached the idea of letting the attorney general's office bring a civil case - somewhat akin to what is done under the unfair trade practices Act - such that if there is Medicaid fraud, the state would be entitled to recover the overcharge, it's investigation costs, it's [attorney] fees, and a penalty. Because there are proof problems in criminal cases that don't apply in civil cases, a conceptual amendment that provides for a very simple cost- recovery action by the attorney general's office might be a good idea, he suggested. Number 2147 SENATOR GREEN said that in the audit process, as the [independent] audit firm checks the Medicaid records and goes through claims and billings, if something raises a red flag, those with the biggest red flags are prosecutable whereas those with smaller red flags or yellow flags go back to the department to deal with. The department then goes through an "interoffice" process of reevaluating the case, asking for more information, substantiating billings, and speaking to the parties involved. She posited that this latter process probably takes place all the time. SENATOR GREEN predicted that doing as Representative Gara suggested wouldn't be necessary, because under what is proposed via SSSB 41, the DOL and the DHSS will be required to communicate with each other regarding potential fraud situations. She noted that those who are found to have violated the provisions of the Medicaid program are removed from that program for a period of time. She recommended asking the departments for their view regarding Representative Gara's suggestion of providing for a civil remedy. Number 2046 DONALD R. KITCHEN, Assistant Attorney General, Medicaid Provider Fraud, Office of Special Prosecutions & Appeals, Criminal Division, Department of Law (DOL), on that issue, said: I think what [Representative Gara is] talking about is essentially a civil false-claims action that is permissible in the federal system. And I did not include it when we were working with Mr. Branchflower and other folks in getting this started, only because I thought it was probably a bit too ambitious for the first time around. But certainly, investigative costs, our costs, and penalties are [appropriately recovered] in the federal system when these same kinds of suits are brought. And it would, I believe, cover probably what's considered a middle ground that does not get moneys recovered, and that is where the provider gets money they're not entitled to and DMA doesn't go after them administratively when they could. So, I think a civil false-claims action, as requested, is a good idea; I don't know if we can hammer it out this late, but I would certainly be willing to try. REPRESENTATIVE GARA said that his worry is that under the existing remedies, if all that can be recovered are court rule costs, those don't include investigative costs. Is there a statute that provides for the recovery of investigative costs? MR. KITCHEN said that he had not thought about including the recovery of investigative costs in the version that's before the committee. REPRESENTATIVE GARA suggested that Mr. Sniffen from the Fair Business Practice Section, Civil Division (Anchorage), Department of Law, could probably help Mr. Kitchen draft such a provision in a short period time. He asked Senator Green whether she would be interested in exploring such an addition. SENATOR GREEN said, "I don't have any problem with it; I don't know enough about it to speak to it." She suggested asking Mr. Branchflower for his opinion on this issue. Number 1951 STEPHEN BRANCHFLOWER, Director, Office of Victims' Rights (OVR), Alaska State Legislature, said that there are federal regulations that every state that accepts federal funding to pay for the Medicaid program has to agree to, and that when he was the Director of the Medicaid Fraud Control Unit, that unit handled both civil and criminal matters. Most of the money that was recovered during his tenure - almost $3 million - was recovered civilly, he explained. He opined that the federal false claim statutes are good, but added that he would prefer for the bill to go forward, "in the interest of at least loading the guns of the prosecutors ... for this year," and then revisit it at a later time. REPRESENTATIVE GARA indicated that he would ask the attorney general's office to work on an amendment that Senator Green and other interested parties could look at before the bill goes to the House floor; if the amendment is acceptable to everyone, it could then be offered on the House floor. CHAIR McGUIRE said that although what Representative Gara is proposing seems reasonable, she did not want to hold the bill up too long. MR. KITCHEN indicated that he might be able to come up with appropriate language within a couple of days. REPRESENTATIVE GARA relayed that what he is interested in is a provision that would allow for the recovery, in full, of investigation costs, attorney fees for overcharges, and penalties similar to what is provided for in the unfair trade practices Act. SENATOR GREEN noted that SSSB 41 also has a House Finance Committee referral, and suggested that perhaps an amendment to that effect could be added in that committee. CHAIR McGUIRE relayed that in addition to Mr. Kitchen and Mr. Branchflower, representatives from the Department of Health and Social Services were also available to answer questions. Number 1721 REPRESENTATIVE GRUENBERG mentioned that language on page 3, lines 24-25, is similar to language on page 7, line 31, through page 8, line [2]. He said he is concerned that there aren't statutory standards for the protection of patients' privacy, and suggested that staff should also work on such a language change. He then turned attention to language on page 4, lines 18-19, which would make it a crime to knowingly destroy a medical assistance record. He suggested that it would be unreasonable to expect providers to keep all such records indefinitely and, therefore, there ought to be a stipulation that such records could be destroyed after a certain period of time. MR. BRANCHFLOWER, on the issue of patients' privacy, said: Keep in mind that ... the Medicaid program reimburses [providers] before and, in most cases, in the absence of any proof by the provider that the service has actually been rendered. And so it's only after the fact, through audits, and sometimes many months and even years after the fact, that an effort is made to reconcile the billings with the medical charts. And that, of course, gets into the question of privacy. Now, on the provider's side, ... when a doctor wishes to become involved with Medicaid, they have to fill out a form that's called a ... provider enrollment form. And essentially that form is a contract between the provider and the state, and one of the terms in this contract is that the provider has to abide by all the federal regulations; the whole Medicaid program is driven largely by federal regulations. And one of those provisions is to open the person's records, the provider's records, to auditors .... On the other side of the equation, on the patient's side, all of the people, all of the recipients for Medicaid benefits, are eligible as a result of their indigency. And what happens is, when a person wants to obtain Medicaid benefits, they go down to the public assistance office and they fill out the forms, and ... the forms address not only Medicaid eligibility, but also eligibility for public assistance, food stamps, and so forth. And there is a waiver there, [a] prospective waiver, that they sign as a condition of eligibility. Number 1527 So, between the provider enrollment agreement form and the recipient's prospective waiver, all of the concerns that you have expressed are taken care of. Essentially, they specifically agree in writing to ... waive the doctor-patient privilege. And in terms of third persons' getting swept up, sometimes what happens is that - and I would say it happens more frequently than not - when a case comes to the attention of the Medicaid Fraud [Control] Unit and there is reason to believe that there's some criminal conduct that may have transpired, ... the prosecutors will take their evidence before a judge and seek the issuance of the search warrant; [a] search warrant, of course, is only issued upon probable cause, so there has to be evidence ... sufficient for the issuance. MR. BRANCHFLOWER continued: And they typically go into a provider's office and they will seize the entire patient population in terms of the files, and usually this is hundreds and hundreds of files. And what happens is that the auditor that works within the Medicaid Fraud [Control] Unit will take each patient file and attempt to reconcile the billings for that provider, not only with the ... Medicaid billings but also [with regard to] the private payor, the cash payor, the insurance payors, and so forth. The reason [for doing this] is that there is essentially a law that says that the provider cannot charge the State of Alaska more money than ... non- Medicaid patients. And so these are all ... circumstantial threads of fraud that can be ultimately incorporated into a charging document. So even as to third persons, even as to non-Medicaid patients, those records are only obtained after some judge passes judgment on the existence of probable cause. And so I think there is already in place a system to protect the privacy of all of the parties who are involved in this issue. Number 1428 CHAIR McGUIRE asked Mr. Branchflower to describe exactly what purportedly guarantees the privacy of [non-Medicaid] patients. REPRESENTATIVE GRUENBERG asked whether a search warrant has to be obtained in all cases. MR. BRANCHFLOWER replied: Unless there is a specific waiver from the non- Medicaid patient, yes. I don't know of any other way of obtaining a medical charge for a non-Medicaid patient ... unless the person agrees to ... them obtaining it. ... The doctor-patient privilege, with respect to non-Medicaid patients, is something that is already a matter of law in the [Alaska] Rules of Evidence. Plus there are provisions for maintaining the confidentiality of the persons who are non- Medicaid patients. And it's been my experience ... that when we file charging documents, which ... are public records, we ... preserve the identity of the patients by using their initials in very much the same way we do with sexual assault victims .... And of course the facts that give rise to the charge are stated in those pleadings, but there's usually, in my experience, nothing about the statement of facts that would disclose the identity of the patients themselves. Now, it may come to pass that as the case moves through a trial, that it will be necessary to subpoena patients who are not Medicaid patients; in that case, appropriate steps can be taken to preserve that person's privacy, and that will be up to the trial judge. There are rules in place to take care of that. REPRESENTATIVE GRUENBERG asked what privacy right the patient, whether Medicaid or non-Medicaid, has from the investigator. Number 1278 MR. BRANCHFLOWER reiterated that the Medicaid patient has prospectively waived his/her right to privacy, adding that most of the investigator's work focuses on the conduct of the provider rather than the recipient, although there are many examples of recipient fraud. Because of the resources required to investigate Medicaid fraud cases, however, investigator's choose to "get the biggest bang for the buck" by going after the provider's records. So when recipients are being interviewed, they are asked whether services were actually rendered as billed. REPRESENTATIVE GRUENBERG noted, however, that in looking through individual patient files, investigators have access to very private information. MR. BRANCHFLOWER acknowledged that investigators do have access to medical records and the information that relates to the treatment that was claimed to have been provided. He argued, however, that auditors, even when just looking at information from a financial standpoint, are also bound by federal confidentiality regulations. REPRESENTATIVE GRUENBERG said he would feel more comfortable if there was language in SSSB 41 that said due care must be taken, in the course of the investigation, to preserve the patient's privacy. He asked that staff work on such language with the sponsor. He then returned to the issue of destroying medical assistance records, and asked that a provision be included that would allow a provider to destroy such records after a certain period of time. MR. BRANCHFLOWER offered that the answer to that issue lies with the fact that before a person can be subject to prosecution for any of the actions listed on page 4, lines 18-19, it has to be proven that the person acted with the requisite culpable mental state, which is knowingly. He acknowledged that providers do eventually destroy records as a matter of course, and opined that they would be protected from prosecution because they would not be doing it with the intent of advancing fraud of the Medicaid program. He relayed that it would be acceptable if some sort of affirmative defense or exclusion were added that would allow for the destruction of such records if done for a legitimate reason. MR. KITCHEN noted that the "Medicaid rules" require providers to keep such records for seven years. He assured the committee that the DOL would never prosecute providers for not keeping records that the Medicaid program no longer required them to keep. Number 0981 ANNE CARPENETI, Assistant Attorney General, Legal Services Section-Juneau, Criminal Division, Department of Law (DOL), after noting that the language on page 4, lines 18-19, was taken from the statutes pertaining to the crime of tampering with public records in the second degree, suggested that the phrase "knowing that the person lacks the authority to do so" could be added after "record" in order to address Representative Gruenberg's concern. REPRESENTATIVE GRUENBERG expressed a willingness to offer such language as an amendment. MR. KITCHEN suggested, alternatively, that adding the phrase "except as otherwise permitted by law" would accomplish the same thing without creating the problem of having to prove who told whom to destroy the medical assistance records. REPRESENTATIVE GRUENBERG indicated that he preferred Mr. Kitchen's suggestion instead. REPRESENTATIVE GARA objected, and said: Then you'll have the situation of somebody who removes or impairs the legibility or the availability of a record: a secretary, who doesn't know the law, who does so by mistake, or does so because their boss wants them just to deal with records somehow, and all of a sudden they'll have committed a crime. REPRESENTATIVE HOLM said no. CHAIR McGUIRE pointed out that knowingly is the culpable mental state. Number 0839 REPRESENTATIVE GARA argued, however: But ... when you crumble up a record, you're knowingly crumbling up the record. The real question is, do you know that you're breaking [the] law or do you know that you're ... intentionally trying to deprive somebody of a record? But just knowingly impairing the legibility, [well] that's just crumbling up a record without any bad intent. The question is, do you have any bad intent? And that part is actually throughout this ... page 4. We're not very careful in limiting these criminal sanctions to people who have bad intent; we're just limiting them to people who know the physical process that they're going through, of throwing out a record or destroying a record, but they could just be trying to thin out a file for their boss .... And so I've got an overall concern here. MR. BRANCHFLOWER said that perhaps the solution would be to stipulate a specific timeframe, for example, 10 years after the preparation of the document. That way, providers could simply look at the date on the document. REPRESENTATIVE GRUENBERG suggested that staff work on this issue before the bill's next hearing. CHAIR McGUIRE agreed to that suggestion and instructed committee staff to focus on the issues of patients' privacy and the destruction of the medical assistance records. REPRESENTATIVE HOLM asked why the fiscal note did not reflect the potential savings. SENATOR GREEN indicated that the fiscal notes for SSSB 41 focus on the cost to the state. REPRESENTATIVE GARA said that he wants SSSB 41 to be limited to intentionally fraudulent conduct. MR. BRANCHFLOWER posited that all of the issues the committee has concerns with could be resolved by working on the bill overnight. [SSSB 41 was held over.]
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