Thursday
Mar172011
Health and Human Services (“HHS”) Office of Inspector General (“OIG”) issues Proposed Rules on State Medicaid Fraud Control Units (“MFCUs”); Data Mining
HHS, today (March 17, 2011) issued a proposed rule to amend 42 CFR 1007.19(e)(2) to allow State MFCUs to receive Federal funding for use of sophisticated data mining technology in detecting and investigating Medicaid Fraud. Currently, the CFR prohibits MFCUs from receiving Federal matching funds for the costs of data mining .
The Proposed Rule adds a definition of “Data Mining” at section 42 CFR 1007.1. Data Mining under the rule will refer to the “practice of electronically sorting Medicaid claims through statistical models and intelligent technologies to uncover patterns and relationships contained within the Medicaid claims activity and history to identify aberrant utilization and billing practices that are potentially fraudulent.” Currently, MFCUs rely solely on referrals from a Medicaid program integrity unit or other sources for referrals.
At the Federal level, use of data mining and other law enforcement tools, including Medicare Fraud Strike Forces, have resulted in hundreds of criminal charges, convictions and more than $355 Million in court ordered restitutions, fines and penalties for fraud against the Medicare program since 2007. While it is not anticipated that individual State MFCUs would see the same result, HHS anticipates that data mining by MFCUs could enhance the MFCU’s ability to counter new and existing fraud schemes more effectively by identifying early fraud indicators, and to use their resources to take full advantage of their expertise in detecting and investigating Medicaid fraud.
Federal Funding will only be available to MFCUs that satisfy the following conditions that will be promulgated at 42 CFR 1007.20: (1) The MFCU describes the duration of the data mining activity and the amount of staff time to be expended; (2) the MFCU identifies the methods of cooperation between the MFCU and Medicaid agency, and between the MFCU and review contractors selected by the CMS Medicaid Integrity Group; and (3) MFCU employees engaged in data mining receive specialized training in data mining techniques.
Finally, those MFCUs approved for Federal matching funds to engage in data mining will be required to report costs associated with expenditures attributed to data mining activities; the number of cases generated from those activities; the outcome and status of those cases; and monetary recoveries from the data mining activities.
Public comments on the Proposed Rule are being accepted until May 16, 2011 at 5:00 p.m.
Thank you to Lisa Bliss, a member of our Behavioral Health Team, for authoring this entry.

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