H.B. No. 1743


   AN ACT


  relating to prevention of fraud and abuse under the
medical assistance program; creating an offense.


	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:


	SECTION 1.  Subchapter B, Chapter 32, Human Resources
Code, is amended by adding Section 32.0291 to read
as follows:


	Sec. 32.0291.  PREPAYMENT REVIEWS AND POSTPAYMENT
HOLDS.  (a)  Notwithstanding any other law, the department
may:


		(1)  perform a prepayment review of a claim for reimbursement
under the medical assistance program to determine whether
the claim involves fraud or abuse; and


		(2)  as necessary to perform that review, withhold
payment of the claim for not more than five working
days without notice to the person submitting the claim.


	(b)  Notwithstanding any other law, the department
may impose a postpayment hold on payment of future
claims submitted by a provider if the department has
reliable evidence that the provider has committed fraud
or wilful misrepresentation regarding a claim for reimbursement
under the medical assistance program.  The department
must notify the provider of the postpayment hold not
later than the fifth working day after the date the
hold is imposed.


	(c)  On timely written request by a provider subject
to a postpayment hold under Subsection (b), the department
shall file a request with the State Office of Administrative
Hearings for an expedited administrative hearing regarding
the hold.  The provider must request an expedited hearing
under this subsection not later than the 10th day after
the date the provider receives notice from the department
under Subsection (b).  The administrative law judge
shall order the department to discontinue imposing
the hold unless the department makes a prima facie
showing at the hearing that the evidence relied on
by the department in imposing the hold is relevant,
reliable, credible, and material to the issue of fraud
or wilful misrepresentation.


	(d)  The department shall adopt rules that allow
a provider subject to a postpayment hold under Subsection
(b) to seek an informal resolution of the issues identified
by the department in the notice provided under that
subsection.  A provider must seek an informal resolution
under this subsection not later than the deadline prescribed
by Subsection (c).  A provider's decision to seek an
informal resolution under this subsection does not
extend the time by which the provider must request
an expedited administrative hearing under Subsection
(c).  However, the department may request that any
hearing initiated under Subsection (c) be stayed until
the informal resolution process is completed.


	SECTION 2.  Section 32.032, Human Resources Code, is
amended to read as follows:


	Sec. 32.032.  PREVENTION AND DETECTION OF FRAUD AND
ABUSE.  The department shall adopt reasonable rules
for minimizing the opportunity for fraud and abuse,
for establishing and maintaining methods for detecting
and identifying situations in which a question of fraud
or abuse in the program may exist, and for referring
cases where fraud or abuse appears to exist
to the appropriate law enforcement agencies for prosecution.


	SECTION 3.  Section 32.0321(a), Human Resources Code,
is amended to read as follows:


	(a)  The department by rule may require each provider
of medical assistance in a provider type that has demonstrated
significant potential for fraud or abuse to file with
the department a surety bond in a reasonable amount.
 The department by rule shall require a provider
of medical assistance to file with the department a
surety bond in a reasonable amount if the department
identifies a pattern of suspected fraud or abuse involving
criminal conduct relating to the provider's services
under the medical assistance program that indicates
the need for protection against potential future acts
of fraud or abuse.


	SECTION 4.  Section 32.039(a), Human Resources Code,
is amended by adding Subdivision (1-a) to read as follows:


		(1-a)  "Inducement" includes a service, cash in any
amount, entertainment, or any item of value.


	SECTION 5.  Section 32.039, Human Resources Code, is
amended by amending Subsections (b), (u), and (v) and
adding Subsections (w) and (x) to read as follows:


	(b)  A person commits a violation if the person:


		(1)  presents or causes to be presented to the department
a claim that contains a statement or representation
the person knows or should know to be false;


		(1-a)  engages in conduct that violates Section 102.001,
Occupations Code;


		(1-b)  solicits or receives, directly or indirectly,
overtly or covertly any remuneration, including any
kickback, bribe, or rebate, in cash or in kind for
referring an individual to a person for the furnishing
of, or for arranging the furnishing of, any item or
service for which payment may be made, in whole or
in part, under the medical assistance program, provided
that this subdivision does not prohibit the referral
of a patient to another practitioner within a multispecialty
group or university medical services research and development
plan (practice plan) for medically necessary services;


		(1-c)  solicits or receives, directly or indirectly,
overtly or covertly any remuneration, including any
kickback, bribe, or rebate, in cash or in kind for
purchasing, leasing, or ordering, or arranging for
or recommending the purchasing, leasing, or ordering
of, any good, facility, service, or item for which
payment may be made, in whole or in part, under the
medical assistance program;


		(1-d)  offers or pays, directly or indirectly, overtly
or covertly any remuneration, including any kickback,
bribe, or rebate, in cash or in kind to induce a person
to refer an individual to another person for the furnishing
of, or for arranging the furnishing of, any item or
service for which payment may be made, in whole or
in part, under the medical assistance program, provided
that this subdivision does not prohibit the referral
of a patient to another practitioner within a multispecialty
group or university medical services research and development
plan (practice plan) for medically necessary services;


		(1-e)  offers or pays, directly or indirectly, overtly
or covertly any remuneration, including any kickback,
bribe, or rebate, in cash or in kind to induce a person
to purchase, lease, or order, or arrange for or recommend
the purchase, lease, or order of, any good, facility,
service, or item for which payment may be made, in
whole or in part, under the medical assistance program;


		(1-f)  provides or offers an inducement in a manner
or for a purpose not otherwise prohibited by this section
or Section 102.001, Occupations Code, to an individual,
including a recipient, provider, or employee of a provider,
for the purpose of influencing a decision regarding
selection of a provider or receipt of a good or service
under the medical assistance program or for the purpose
of otherwise influencing a decision regarding the use
of goods or services provided under the medical assistance
program; or


		(2)  is a managed care organization that contracts with
the department to provide or arrange to provide health
care benefits or services to individuals eligible for
medical assistance and:


			(A)  fails to provide to an individual a health care
benefit or service that the organization is required
to provide under the contract with the department;


			(B)  fails to provide to the department information
required to be provided by law, department rule, or
contractual provision;


			(C)  engages in a fraudulent activity in connection
with the enrollment in the organization's managed care
plan of an individual eligible for medical assistance
or in connection with marketing the organization's
services to an individual eligible for medical assistance;
or


			(D)  engages in actions that indicate a pattern of:


				(i)  wrongful denial of payment for a health care benefit
or service that the organization is required to provide
under the contract with the department; or


				(ii)  wrongful delay of at least 45 days or a longer
period specified in the contract with the department,
not to exceed 60 days, in making payment for a health
care benefit or service that the organization is required
to provide under the contract with the department.


	(u)  Except as provided by Subsection (w), a
[A] person found liable for a violation
under Subsection (c) that resulted in injury to an
elderly person, as defined by Section 48.002(a)(1)
[48.002(1)], a disabled person, as
defined by Section 48.002(a)(8)(A) [48.002(8)(A)],
or a person younger than 18 years of age may not provide
or arrange to provide health care services under the
medical assistance program for a period of 10 years.
 The department by rule may provide for a period of
ineligibility longer than 10 years.  The period of
ineligibility begins on the date on which the determination
that the person is liable becomes final.  [This
subsection does not apply to a person who operates
a nursing facility or an ICF-MR facility.]


	(v)  Except as provided by Subsection (w), a
[A] person found liable for a violation
under Subsection (c) that did not result in injury
to an elderly person, as defined by Section 48.002(a)(1)
[48.002(1)], a disabled person, as
defined by Section 48.002(a)(8)(A) [48.002(8)(A)],
or a person younger than 18 years of age may not provide
or arrange to provide health care services under the
medical assistance program for a period of three years.
 The department by rule may provide for a period of
ineligibility longer than three years.  The period
of ineligibility begins on the date on which the determination
that the person is liable becomes final[. 
This subsection does not apply to a person who operates
a nursing facility or an ICF-MR facility].


	(w)  The department by rule may prescribe criteria
under which a person described by Subsection (u) or
(v) is not prohibited from providing or arranging to
provide health care services under the medical assistance
program.  The criteria may include consideration of:


		(1)  the person's knowledge of the violation;


		(2)  the likelihood that education provided to the
person would be sufficient to prevent future violations;


		(3)  the potential impact on availability of services
in the community served by the person; and


		(4)  any other reasonable factor identified by the
department.


	(x)  Subsections (b)(1-b) through (1-f) do not prohibit
a person from engaging in:


		(1)  generally accepted business practices, as determined
by department rule, including:


			(A)  conducting a marketing campaign;


			(B)  providing token items of minimal value that
advertise the person's trade name; and


			(C)  providing complimentary refreshments at an informational
meeting promoting the person's goods or services;


		(2)  the provision of a value-added service if the
person is a managed care organization; or


		(3)  other conduct specifically authorized by law,
including conduct authorized by federal safe harbor
regulations (42 C.F.R. Section 1001.952).


	SECTION 6.  Subchapter B, Chapter 32, Human Resources
Code, is amended by adding Section 32.0391 to read
as follows:


	Sec. 32.0391.  CRIMINAL OFFENSE.  (a)  A person commits
an offense if the person intentionally or knowingly
commits a violation under Section 32.039(b)(1-b), (1-c),
(1-d), or (1-e).


	(b)  An offense under this section is a state jail
felony.


	(c)  If conduct constituting an offense under this
section also constitutes an offense under another provision
of law, including a provision in the Penal Code, the
person may be prosecuted under either this section
or the other provision.


	(d)  With the consent of the appropriate local county
or district attorney, the attorney general has concurrent
jurisdiction with that consenting local prosecutor
to prosecute an offense under this section.


	SECTION 7.  Subchapter B, Chapter 32, Human Resources
Code, is amended by adding Section 32.060 to read as
follows:


	Sec. 32.060.  THIRD-PARTY BILLING VENDORS.  (a) 
A third-party billing vendor may not submit a claim
with the department for reimbursement on behalf of
a provider of medical services under the medical assistance
program unless the vendor has entered into a contract
with the department authorizing that activity.


	(b)  To the extent practical, the contract shall
contain provisions comparable to the provisions contained
in contracts between the department and providers of
medical services, with an emphasis on provisions designed
to prevent fraud or abuse under the medical assistance
program.  At a minimum, the contract must require the
third-party billing vendor to:


		(1)  provide documentation of the vendor's authority
to bill on behalf of each provider for whom the vendor
submits claims;


		(2)  submit a claim in a manner that permits the
department to identify and verify the vendor, any computer
or  telephone line used in submitting the claim, any
relevant user password used in submitting the claim,
and any provider number referenced in the claim; and


		(3)  subject to any confidentiality requirements
imposed by federal law, provide the department, the
office of the attorney general, or authorized representatives
with:


			(A)  access to any records maintained by the vendor,
including original records and records maintained by
the vendor on behalf of a provider, relevant to an
audit or investigation of the vendor's services or
another function of the department or office of attorney
general relating to the vendor; and


			(B)  if requested, copies of any records described
by Paragraph (A) at no charge to the department, the
office of the attorney general, or authorized representatives.


	(c)  On receipt of a claim submitted by a third-party
billing vendor, the department shall send a remittance
notice directly to the provider referenced in the claim.
 The notice must:


		(1)  include detailed information regarding the claim
submitted on behalf of the provider; and


		(2)  require the provider to review the claim for
accuracy and notify the department promptly regarding
any errors.


	(d)  The department shall take all action necessary,
including any modifications of the department's claims
processing system, to enable the department to identify
and verify a third-party billing vendor submitting
a claim for reimbursement under the medical assistance
program, including identification and verification
of any computer or telephone line used in submitting
the claim, any relevant user password used in submitting
the claim, and any provider number referenced in the
claim.


	SECTION 8.  Subchapter C, Chapter 531, Government Code,
is amended by adding Section 531.1011 to read as follows:


	Sec. 531.1011.  DEFINITIONS.  For purposes of this
subchapter:


		(1)  "Fraud" means an intentional deception or misrepresentation
made by a person with the knowledge that the deception
could result in some unauthorized benefit to that person
or some other person, including any act that constitutes
fraud under applicable federal or state law.


		(2)  "Furnished" refers to items or services provided
directly by, or under the direct supervision of, or
ordered by a practitioner or other individual (either
as an employee or in the individual's own capacity),
a provider, or other supplier of services, excluding
services ordered by one party but billed for and provided
by or under the supervision of another.


		(3)  "Hold on payment" means the temporary denial
of reimbursement under the Medicaid program for items
or services furnished by a specified provider.


		(4)  "Practitioner" means a physician or other individual
licensed under state law to practice the individual's
profession.


		(5)  "Program exclusion" means the suspension of
a provider from being authorized under the Medicaid
program to request reimbursement of items or services
furnished by that specific provider.


		(6)  "Provider" means a person, firm, partnership,
corporation, agency, association, institution, or other
entity that was or is approved by the commission to:


			(A)  provide medical assistance under contract or
provider agreement with the commission; or


			(B)  provide third-party billing vendor services
under a contract or provider agreement with the commission.


	SECTION 9.  Section 531.102, Government Code, is amended
by amending Subsections (a) and (d) and adding Subsections
(f) and (g) to read as follows:


	(a)  The commission, through the commission's office
of investigations and enforcement, is responsible for
the investigation of fraud and abuse in the
provision of health and human services and the enforcement
of state law relating to the provision of those services.


	(d)  The commission may require employees of health
and human services agencies to provide assistance to
the commission in connection with the commission's
duties relating to the investigation of fraud and
abuse in the provision of health and human services.


	(f)(1)  If the commission receives a complaint of
Medicaid fraud or abuse from any source, it must conduct
an integrity review to determine whether there is sufficient
basis to warrant a full investigation.  An integrity
review must commence not later than 60 days after the
commission receives a complaint or has reason to believe
that fraud or abuse has occurred.  An integrity review
shall be completed not later than 90 days after it
has commenced.


		(2)  If the findings of an integrity review give
the commission reason to believe that an incident of
fraud or abuse involving possible criminal conduct
has occurred in the Medicaid program, the commission
must take the following action, as appropriate, not
later than 30 days after the completion of the integrity
review:


			(A)  if a provider is suspected of fraud or abuse
involving criminal conduct, the commission must refer
the case to the state's Medicaid fraud control unit,
provided that such criminal referral does not preclude
the commission from continuing its investigation of
the provider, which investigation may lead to the imposition
of appropriate administrative or civil sanctions; or


			(B)  if there is reason to believe that a recipient
has defrauded the Medicaid program, the commission
may conduct a full investigation of the suspected fraud.


	(g)(1)  Whenever the commission learns or has reason
to suspect that a provider's records are being withheld,
concealed, destroyed, fabricated, or in any way falsified,
the commission  shall immediately refer the case to
the state's Medicaid fraud control unit.  However,
such criminal referral does not preclude the commission
from continuing its investigation of the provider,
which investigation may lead to the imposition of appropriate
administrative or civil sanctions.


		(2)  In addition to other instances authorized under
state or federal law, the commission shall impose without
prior notice a hold on payment of claims for reimbursement
submitted by a provider to compel production of records
or when requested by the state's Medicaid fraud control
unit, as applicable.  The commission must notify the
provider of the hold on payment not later than the
fifth working day after the date the payment hold is
imposed.


		(3)  On timely written request by a provider subject
to a hold on payment under Subdivision (2), other than
a hold requested by the state's Medicaid fraud control
unit, the commission shall file a request with the
State Office of Administrative Hearings for an expedited
administrative hearing regarding the hold.  The provider
must request an expedited hearing under this subdivision
not later than the 10th day after the date the provider
receives notice from the commission under Subdivision
(2).


		(4)  The commission shall adopt rules that allow
a provider subject to a hold on payment under Subdivision
(2), other than a hold requested by the state's Medicaid
fraud control unit, to seek an informal resolution
of the issues identified by the commission in the notice
provided under that subdivision.  A provider must seek
an informal resolution under this subdivision not later
than the deadline prescribed by Subdivision (3).  A
provider's decision to seek an informal resolution
under this subdivision does not extend the time by
which the provider must request an expedited administrative
hearing under Subdivision (3).  However, the commission
may request that any hearing initiated under Subdivision
(3) be stayed until the informal resolution process
is completed.


		(5)  The commission shall, in consultation with the
state's Medicaid fraud control unit, establish guidelines
under which holds on payment or program exclusions:


			(A)  may permissively be imposed on a provider; or


			(B)  shall automatically be imposed on a provider.


	SECTION 10.  Section 531.103(f), Government Code, is
amended to read as follows:


	(f)  A [The] district attorney,
county attorney, city attorney, or private collection
agency may collect and retain costs associated with
a [the] case referred to
the attorney or agency and 20 percent of the amount
of the penalty, restitution, or other reimbursement
payment collected.


	SECTION 11.  Section 531.104, Government Code, is amended
by adding Subsection (c) to read as follows:


	(c)  The memorandum of understanding must ensure
that no barriers to direct fraud referrals to the state's
Medicaid fraud control unit by Medicaid agencies or
unreasonable impediments to communication between Medicaid
agency employees and the state's Medicaid fraud control
unit will be imposed.


	SECTION 12.  Section 531.107(b), Government Code, is
amended to read as follows:


	(b)  The task force is composed of a representative
of the:


		(1)  attorney general's office, appointed by the attorney
general;


		(2)  comptroller's office, appointed by the comptroller;


		(3)  Department of Public Safety, appointed by the public
safety director;


		(4)  state auditor's office, appointed by the state
auditor;


		(5)  commission, appointed by the commissioner of health
and human services;


		(6)  Texas Department of Human Services, appointed by
the commissioner of human services; [and]


		(7)  Texas Department of Insurance, appointed by the
commissioner of insurance; and


		(8)  Texas Department of Health, appointed by the
commissioner of public health.


	SECTION 13.  Section 31.03, Penal Code, is amended by
adding Subsection (j) to read as follows:


	(j)  With the consent of the appropriate local county
or district attorney, the attorney general has concurrent
jurisdiction with that consenting local prosecutor
to prosecute an offense under this section that involves
the state Medicaid program.


	SECTION 14.  Section 32.45, Penal Code, is amended by
adding Subsection (d) to read as follows:


	(d)  With the consent of the appropriate local county
or district attorney, the attorney general has concurrent
jurisdiction with that consenting local prosecutor
to prosecute an offense under this section that involves
the state Medicaid program.


	SECTION 15.  Section 32.46, Penal Code, is amended by
adding Subsection (e) to read as follows:


	(e)  With the consent of the appropriate local county
or district attorney, the attorney general has concurrent
jurisdiction with that consenting local prosecutor
to prosecute an offense under this section that involves
the state Medicaid program.


	SECTION 16.  Section 37.10, Penal Code, is amended by
adding Subsection (i) to read as follows:


	(i)  With the consent of the appropriate local county
or district attorney, the attorney general has concurrent
jurisdiction with that consenting local prosecutor
to prosecute an offense under this section that involves
the state Medicaid program.


	SECTION 17.  Articles 59.01(1) and (2), Code of Criminal
Procedure, are amended to read as follows:


		(1)  "Attorney representing the state" means the prosecutor
with felony jurisdiction in the county in which a forfeiture
proceeding is held under this chapter or, in a proceeding
for forfeiture of contraband as defined under Subdivision
(2)(B)(iv) of this article, the city attorney of a
municipality if the property is seized in that municipality
by a peace officer employed by that municipality and
the governing body of the municipality has approved
procedures for the city attorney acting in a forfeiture
proceeding.  In a proceeding for forfeiture of contraband
as defined under Subdivision (2)(B)(vii) of this article,
the term includes the attorney general.


		(2)  "Contraband" means property of any nature, including
real, personal, tangible, or intangible, that is:


			(A)  used in the commission of:


				(i)  any first or second degree felony under the Penal
Code;


				(ii)  any felony under Section 15.031(b), 21.11, 38.04,
43.25, or 43.26 or Chapter 29, 30, 31, 32, 33, 33A,
or 35, Penal Code; or


				(iii)  any felony under The Securities Act (Article
581-1 et seq., Vernon's Texas Civil Statutes);


			(B)  used or intended to be used in the commission of:


				(i)  any felony under Chapter 481, Health and Safety
Code (Texas Controlled Substances Act);


				(ii)  any felony under Chapter 483, Health and Safety
Code;


				(iii)  a felony under Chapter 153, Finance Code;


				(iv)  any felony under Chapter 34, Penal Code;


				(v)  a Class A misdemeanor under Subchapter B, Chapter
365, Health and Safety Code, if the defendant has been
previously convicted twice of an offense under that
subchapter; [or]


				(vi)  any felony under Chapter 152, Finance Code;
or


				(vii)  any felony under Chapter 31, 32, or 37, Penal
Code, that involves the state Medicaid program, or
any felony under Chapter 36, Human Resources Code;


			(C)  the proceeds gained from the commission of a felony
listed in Paragraph (A) or (B) of this subdivision
or a crime of violence; or


			(D)  acquired with proceeds gained from the commission
of a felony listed in Paragraph (A) or (B) of this
subdivision or a crime of violence.


	SECTION 18.  Article 59.06, Code of Criminal Procedure,
is amended by adding Subsection (p) to read as follows:


	(p)  Notwithstanding Subsection (a), and to the extent
necessary to protect the commission's ability to recover
amounts wrongfully obtained by the owner of the property
and associated damages and penalties to which the commission
may otherwise be entitled by law, the attorney representing
the state shall transfer to the Health and Human Services
Commission all forfeited property defined as contraband
under Article 59.01(2)(B)(vii).  If the forfeited property
consists of property other than money or negotiable
instruments, the attorney representing the state may,
if approved by the commission, sell the property and
deliver to the commission the proceeds from the sale,
minus costs attributable to the sale.  The sale must
be conducted in a manner that is reasonably expected
to result in receiving the fair market value for the
property.


	SECTION 19.  (a)  The Medicaid and Public Assistance
Fraud Oversight Task Force, with the participation
of the Texas Department of Health's Bureau of Vital
Statistics and other agencies designated by the comptroller,
shall study procedures and documentation requirements
used by the state in confirming a person's identity
for purposes of establishing entitlement to Medicaid
and other benefits provided through health and human
services programs.


	(b)  Not later than December 1, 2004, the Medicaid and
Public Assistance Fraud Oversight Task Force, with
assistance from the agencies participating in the study
required by Subsection (a) of this section, shall submit
a report to the legislature containing recommendations
for improvements in the procedures and documentation
requirements described by Subsection (a) of this section
that would strengthen the state's ability to prevent
fraud and abuse in the Medicaid program and other health
and human services programs.


	SECTION 20.  Not later than December 1, 2003, the Office
of the Attorney General and the Health and Human Services
Commission shall amend the memorandum of understanding
required by Section 531.104, Government Code, as necessary
to comply with Section 531.104(c), Government Code,
as added by this Act.


	SECTION 21.  The changes in law made by this Act through
amending Section 32.039(b), Human Resources Code, and
adding Section 32.0391, Human Resources Code, apply
only to a violation committed on or after the effective
date of this Act.  For purposes of this section, a
violation is committed on or after the effective date
of this Act only if each element of the violation occurs
on or after that date.  A violation committed before
the effective date of this Act is covered by the law
in effect when the violation was committed, and the
former law is continued in effect for that purpose.


	SECTION 22.  If before implementing any provision of
this Act a state agency determines that a waiver or
authorization from a federal agency is necessary for
implementation of that provision, the agency affected
by the provision shall request the waiver or authorization
and may delay implementing that provision until the
waiver or authorization is granted.


	SECTION 23.  Section 531.103(e), Government Code, is
repealed.


	SECTION 24.  (a)  Except as otherwise provided by Subsection
(b) of this section, this Act takes effect September
1, 2003.


	(b)  Section 32.060, Human Resources Code, as added
by this Act, takes effect January 1, 2004.
______________________________ ______________________________ 

   President of the Senate		Speaker of the House

I certify that H.B. No. 1743 was passed by the House on April 14, 2003, by a non-record vote; and that the House concurred in Senate amendments to H.B. No. 1743 on May 30, 2003, by a non-record vote.

______________________________

Chief Clerk of the House

I certify that H.B. No. 1743 was passed by the Senate, with amendments, on May 28, 2003, by the following vote: Yeas 31, Nays 0.

______________________________

Secretary of the Senate

APPROVED: __________________

Date

__________________

Governor