AUSTIN, Texas – State Sen. Juan “Chuy” Hinojosa does not like the way the Texas Health and Human Services Commission Office of the Inspector General treats Medicaid providers and he wants to rein in the agency next session.

“It appears that healthcare providers are accused of fraud, presumed guilty, and are not given a due process finding from the OIG as to whether fraud exists or not. This is in direct violation of a provider’s inherent rights and the opposite of our safeguarded justice system,” Hinojosa wrote, in a recent letter to Inspector General Doug Wilson.

Calls to Wilson’s office for reaction to Hinojosa’s remarks were not returned at press time.

Hinojosa’s efforts to “safeguard our system of justice” have been boosted by a scathing review of the OIG by the Sunset Commission. The Commission will discuss the operations of the OIG at a hearing at the state Capitol in Austin on Wednesday.

In his letter to Wilson, Hinojosa gave an example of a provider of Medicaid services in his district that was targeted for fraud by the OIG. Here, in Hinojosa’s words, is what happened in that case:

Recently, one of my constituents who is a healthcare provider in the Rio Grande Valley with three service facilities, was put on a 100 percent payment hold by the OIG because he was told a credible allegation of fraud existed. The provider was told that he could request an Informal Resolution Hearing with OIG investigators to present his case. The provider promptly requested a hearing and was given a hearing date in Austin at the OIG offices.

At the Informal Resolution Hearing, there were seven attorneys and inspectors present in a small room along with my constituent and his attorney. The OIG informed him that this was his opportunity to state his case and explain his documentation as to why no fraud existed. This hearing was led by the provider and his attorney as they were the only ones speaking most of the time. Very few questions were asked by the OIG and at no time did any attorney from the OIG’s office state the credible allegation of fraud that they believed existed. In fact, the attorneys refused to address this question even when asked directly by the provider’s attorney. The tone in the room was one of intimidation and a presumption of guilt until innocence was proved – the complete opposite of our legal system.

Following this two hour hearing, my constituent was told that the OIG would further investigate his case and be in touch with him. When the OIG finally communicated with him, he received a reduction in his payment hold to 50 percent. He was told the case was still being investigated. In the meantime, my constituent has been forced to lay off all of his employees at his healthcare facilities because he could not afford to pay them as a result of the 100 percent payment hold that had been in place for weeks. He is in a holding pattern as to whether his doors will shut down as he awaits an OIG resolution.

Common sense would dictate that a decision or a finding as to whether fraud existed in this case would be forthcoming. This is not the case. My office has had extensive conversations with various attorneys, investigators, and the Chief Counsel section at the OIG throughout this case. Last Friday, my office again inquired with the OIG’s Chief Counsel section as to when a decision would be made – as to whether the credible allegations of fraud were substantiated and whether the OIG has found our constituent guilty of the fraudulent allegations.

We were told that no such finding or decision would ever be rendered – the OIG does not make such determinations. According to the OIG office, if a provider wants a decision as to whether fraud exists or whether there is a basis for the payment hold (which is predicated on the presumption of fraud), then this is a decision for the State Office of Administrative Hearings (SOAH). This completely turns our due process and justice system upside down and appears unconstitutional.

My office then inquired as to what happens if the provider does not ask for or go to a SOAH hearing, which is very often the case because of the enormous cost and time associated with this process. The OIG responded that if the provider informs the OIG that they will not be participating in a SOAH hearing, then the OIG’s office will negotiate their “overpayment” amount and a payment plan can be worked out for the provider to pay these monies.

Therefore, the only way for a provider in this instance to get the payment hold lifted is to make payments to the OIG, which by doing so concedes fraud. The provider pays an indicated “overpayment” amount with an inherent assumption they are guilty of fraud – they are left with no choice if they want to remain in business. There is no good faith or genuine inquiry as to whether a credible allegation of fraud exists in any case at hand after a payment hold has been put in place. No final decision is ever made by the OIG as to whether fraud exists or not — the provider is simply guilty and makes payments, or the provider can choose to wait many months and spend thousands of dollars to go to SOAH and await a decision.”

Even if the provider does go to SOAH, a similarly frustrating and controversial process still exists as to how the Health and Humans Services Commission (HHSC) prosecutes fraud cases by utilizing in-house agency judges after a review by SOAH. Recently, agency judges working for HHSC have overturned findings of innocence to one of guilt. Cases in which administrative law judges from SOAH have found that no evidence exists, have later been quickly overturned by HSHC agency judges reaching the opposite conclusion.

Hinojosa concluded his letter to Wilson with these remarks:

“In essence, the agency’s judge rejected the findings of an outside jurist changing the verdict in favor of their employer. It appears that healthcare providers accused of fraud are not given due process and there is an inherent bias and a conflict of interest when the judge presiding over the case, is employed by the same agency prosecuting the case.

“I am alarmed by the reality of the current process the OIG uses to investigate fraud. This process goes beyond a lack of due process or transparency, but infringes on a healthcare provider’s inherent rights to a fair hearing with an actual decision being rendered to justify the OIG’s allegations as to whether fraud exists or not. Simply negotiating with the provider an amount of money to be paid to them to lift a payment hold is nothing short of coercion.

“While I advocate for the prevention of fraud and abuse in our Medicaid system, this is not the avenue by which this goal should be accomplished. The OIG not only serves as prosecutor, judge and jury, but no verdict is ever rendered — rather, a sentence is served by the provider. This is not the type of system envisioned for due process that the Legislature passed last session. Thank you for your time and consideration.”

The Guardian contacted the provider of Medicaid services Hinojosa referred to in his letter but he asked to remain nameless. His company provides therapy services for children with speech problems, autism and Down’s syndrome.

The provider did say he was nearly put out of business by the OIG and praised the work of Hinojosa and state Rep. Richard Raymond.

“Senator Hinojosa observed firsthand the flaws in the OIG operations as to how they treat providers and disregard lawful procedures, an observation that was later echoed by the findings of the sunset report,” the provider said. “The relentless pursuit for just treatment of providers by Senator Hinojosa and Representative Raymond has allowed us to achieve a resolution and an opportunity to salvage our business and continue to service those in need.”

A healthcare consultant in South Texas who also wished to remain nameless said the IOG’s impact on Medicaid providers in the Valley has been “devastating.” He said: “The industry is operating but nowhere near the volume it used to do. Those who are in business have downsized to 60 to 80 percent. I would say a majority have closed their doors. We are talking about degreed personnel, professionals, who were running good companies going out of business. A single investigator can put a hold on a company and run it out of business. The OIG has had an impact across the industry, on doctors, hospitals, home care, dentists, and ambulance providers.”

The consultant said those in the healthcare industry would like to see the law changed so that no one investigator has the power the IOG has. He recommended a permanent review process be put in place to check the work of the IOG.

In its study of the IOG, the Sunset Commission found that Credible Allegation of Fraud (CAF) payment hold hearings do not achieve the intent of state law to act quickly to protect the state against significant cases of fraud.

“OIG actions go beyond the intent of the CAF hold, which is to prevent financial risks to the state posed by ongoing Medicaid payments to fraudulent providers,” the Commission reported. “Despite the intended serious nature of payment holds, OIG uses payment holds as a negotiation tactic or bargaining tool, even for cases that do not pose significant financial risks to the state. Payment holds, including CAF holds, should be reserved for significant events, such as fraud and to compel production of records. Despite this, Sunset staff found during a review of OIG case files that OIG has used payment holds as a bargaining chip to promote settlement in cases that involve just $4,000–$6,000 in overpayments spread over several years, and to discourage providers from appealing certain aspects of their case. Further, some recipients of CAF holds claim that OIG uses holds for cases of non-fraudulent billing and documentation errors. Although OIG believes that it is required to place a hold in such circumstances, federal guidance provides for flexibility on cases involving non-fraudulent billing errors, and the current approach is not consistent with the intent of a CAF hold.”

The Sunset Commission also found that CAF hold hearings have “exceeded their narrow scope, contributing to lengthy and costly hearings that duplicate the function of an overpayment hearing.” The Commission also found that CAF hold hearings “provide for excessive process and undue burdens on providers as compared to cases presenting more serious risks to the state and public.”

In its findings, the Sunset Commission recommends:

*A streamlining of the CAF hold hearing process to more quickly mitigate state financial risks.

* Clarifying good cause exceptions for OIG’s application of a credible allegation of fraud payment hold.

* Clarifying the OIG’s authority to place payment holds only in serious circumstances.

* Requiring the OIG to pay all costs of CAF hold hearings at State Office Administrative Hearings.