On September 20, 2016, the Department of Health and Human Services’ Office of Inspector General (“OIG”) and Centers for Medicare and Medicaid Services (“CMS”) issued a proposed rule to amend the regulations governing state Medicaid Fraud Control Units (“MFCUs”).

State MFCUs, which receive federal funding and are subject to federal regulation, have become increasingly active in healthcare fraud investigations over the last several years, especially in states (such as Georgia) with robust MFCU staffs that incorporate both civil and criminal attorneys. Currently, federal regulations provide that the responsibilities of a state MFCU are to investigate and prosecute (or refer for prosecution) violations of all applicable state laws pertaining to Medicaid fraud, and to review complaints alleging abuse or neglect of patients in healthcare facilities that receive Medicaid funding. Moreover, the regulations provide MFCUs with discretion to review complaints relating to the misappropriation of a patient’s Medicaid funds.

In addition to increasing federal funding for MFCU operating costs and establishing certain standards under which MFCUs must operate, the proposed rule would alter the MFCUs’ duties and responsibilities in small, but important, ways. First, the proposed rule seeks to clarify that the scope of a MFCU’s prosecutorial authority extends not only to criminal matters, but to civil matters as well. Additionally, although CMS and OIG have for years requested that MFCUs refer civil cases to federal investigators and prosecutors for possible application of the federal False Claims Act, especially where the state agency lacks the authority or resources to pursue civil claims on its own, the proposed rule would require that MFCUs make such referrals. Likewise, the proposed rule would require that, when an overpayment is discovered during the course of an investigation, the MFCU must either recover the overpayment or refer the matter to the state’s Medicaid collections agency.  Moreover, the proposed rule would expand the definition of “provider” such that any individual or entity enrolled in a state’s Medicaid program could be subject to a MFCU investigation, rather than just those who actually furnish items or services. Lastly, the proposed rule would give the MFCUs discretion to review complaints of abuse or neglect of patients in certain facilities, including misappropriation of patient funds, regardless of whether payment to such facilities is made under Medicaid.

In summary, if finalized, this proposed rule would expand the scope of MFCU authority and establish even greater ties between federal and state prosecutors. Greater activity and involvement by these state law enforcement agencies would likely lead to an increase in the overall number of healthcare fraud investigations.

CMS and OIG will accept comments on the proposed rule until November 21, 2016.

The attorneys at Chilivis Grubman assist healthcare entities of all types and sizes with state and federal government investigations. For any questions, or if we can assist you in connection with such a matter, please contact us at (404) 262-6505 or sgrubman@cglawfirm.com.