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While the Medicaid Recovery Auditor (RAC) program has continued to struggle to return funds to the Medicare program, state Medicaid Fraud Control Units (MFCUs) continue to see significant financial returns.

Released at the end of April, the U.S. Department of Health and Human Services (HHS) Office of Inspector General’s (OIG’s) 2014 fiscal year report on MFCUs shows total recoveries of just over $2 billion. While this total is down from the $2.5 billion collected in 2013, the total amount collected represents a return rate of $8.53 for every dollar invested in MFCUs via grant dollars.

A majority of the difference in dollars between the last two fiscal years can be accounted for by the drop in recoveries from the state of Virginia. In 2013, Virginia managed to collect over $1 billion, with over $700 million of that total coming from criminal convictions. This figure dropped to a mere $64.7 million for 2014.

Other state MFCUs that have had solid collection records in the past continued the pattern. The state of New York led all states with collections totaling over $378 million. The surprising second-place finisher was Louisiana, with collections totaling over $245 million.

As we look at the entire 2014 report, patterns begin to emerge as to the types of services in MFCU crosshairs. Nationwide, home health care aides and certified nursing aides made up 39 percent of all criminal convictions. On a monetary basis, settlements with drug manufacturers totaling nearly $1.3 billion far exceeded collections in other categories. Overall, 1,337 providers also were excluded from federal healthcare programs stemming from MFCU convictions.

Despite successes, there are numbers that stand out pointing to assumptions that do not hold up to MFCU scrutiny. Mississippi investigated 589 allegations of abuse and neglect, more than any other state, but it led to only 36 convictions and 11 settlements. Similarly, the Indiana, which has one of the best and oldest MFCUs in the country, investigated 941 allegations of fraud and returned only 22 convictions and 30 settlements.  

While MFCUs continue to find recovery success, according to yearly reports, the same is not currently known about Medicaid Recovery Auditor work occurring nationwide. It is notable that there have been no federal or state reports that reliably reveal overpayment dollars successfully recovered due to Medicaid RAC activity. Several states have no contractor in place, either due to a Medicare exception or lack of interest from prospective contractors due to low projected contingency fees.

MFCUs rely on fraud referrals from other Medicaid program integrity units employed by the individual states. This year’s report found that the number of referrals coming from Medicaid managed care organizations (MCOs) was low.

The reasons given for this ranged from lack of dedicated fraud detection staff to MCO contracts not having adequate incentives for MCOs to refer for fraud. It is notable that the report makes no mention of the number of referrals coming in to MFCUs from Medicaid RACs.

Based on the contingency fee arrangements with these contractors, it would not be surprising to discover that the number of fraud referrals from Medicaid RACs to MFCUs nationwide would be low.

About the Author

J. Paul Spencer is a health care consultant with Avastone Health Solutions, located in Wisconsin. He specializes is assisting clients in matters related to coding, physician documentation, revenue cycle improvement, denial management and appeals. Paul has carried the CPC and COC designations from the AAPC since 1998.

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J. Paul Spencer, CPC, COC

J. Paul Spencer is a senior healthcare consultant for DoctorsManagement. Is the national correspondent for Monitor Mondays, the live Internet radio broadcast produced by RACmonitor.

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