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                                                                  S.B. No. 563




AN ACT
relating to the prevention of Medicaid fraud; providing penalties. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Subdivision (9), Section 36.001, Human Resources Code, is amended to read as follows: (9) "Provider" means a person who participates in or who has applied to participate in the Medicaid program as a supplier of a product or service and includes: (A) a management company that manages, operates, or controls another provider; (B) a person, including a medical vendor, that provides a product or service to a provider or to a fiscal agent; (C) an employee of a provider; [and] (D) a managed care organization; and (E) a manufacturer or distributor of a product for which the Medicaid program provides reimbursement. SECTION 2. Subchapter A, Chapter 36, Human Resources Code, is amended by adding Section 36.0011 to read as follows: Sec. 36.0011. CULPABLE MENTAL STATE. (a) For purposes of this chapter, a person acts "knowingly" with respect to information if the person: (1) has knowledge of the information; (2) acts with conscious indifference to the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information. (b) Proof of the person's specific intent to commit an unlawful act under Section 36.002 is not required in a civil or administrative proceeding to show that a person acted "knowingly" with respect to information under this chapter. SECTION 3. Section 36.002, Human Resources Code, is amended to read as follows: Sec. 36.002. UNLAWFUL ACTS. A person commits an unlawful act if the person: (1) knowingly [or intentionally] makes or causes to be made a false statement or misrepresentation of a material fact to permit a person to receive a benefit or payment under the Medicaid program that is not authorized or that is greater than the benefit or payment that is authorized[: [(A) on an application for a contract, benefit, or payment under the Medicaid program; or [(B) that is intended to be used to determine a person's eligibility for a benefit or payment under the Medicaid program]; (2) knowingly [or intentionally] conceals or fails to disclose information that permits [an event: [(A) that the person knows affects the initial or continued right to a benefit or payment under the Medicaid program of: [(i) the person; or [(ii) another person on whose behalf the person has applied for a benefit or payment or is receiving a benefit or payment; and [(B) to permit] a person to receive a benefit or payment under the Medicaid program that is not authorized or that is greater than the benefit or payment [or benefit] that is authorized; (3) knowingly [or intentionally] applies for and receives a benefit or payment on behalf of another person under the Medicaid program and converts any part of the benefit or payment to a use other than for the benefit of the person on whose behalf it was received; (4) knowingly [or intentionally] makes, causes to be made, induces, or seeks to induce the making of a false statement or misrepresentation of material fact concerning: (A) the conditions or operation of a facility in order that the facility may qualify for certification or recertification required by the Medicaid program, including certification or recertification as: (i) a hospital; (ii) a nursing facility or skilled nursing facility; (iii) a hospice; (iv) an intermediate care facility for the mentally retarded; (v) an assisted living facility; or (vi) a home health agency; or (B) information required to be provided by a federal or state law, rule, regulation, or provider agreement pertaining to the Medicaid program; (5) except as authorized under the Medicaid program, knowingly pays, [or intentionally] charges, solicits, accepts, or receives, in addition to an amount paid under the Medicaid program, a gift, money, a donation, or other consideration as a condition to the provision of a service or product or the continued provision of a service or product [to a Medicaid recipient] if the cost of the service or product [provided to the Medicaid recipient] is paid for, in whole or in part, under the Medicaid program; (6) knowingly [or intentionally] presents or causes to be presented a claim for payment under the Medicaid program for a product provided or a service rendered by a person who: (A) is not licensed to provide the product or render the service, if a license is required; or (B) is not licensed in the manner claimed; (7) knowingly [or intentionally] makes a claim under the Medicaid program for: (A) a service or product that has not been approved or acquiesced in by a treating physician or health care practitioner; (B) a service or product that is substantially inadequate or inappropriate when compared to generally recognized standards within the particular discipline or within the health care industry; or (C) a product that has been adulterated, debased, mislabeled, or that is otherwise inappropriate; (8) makes a claim under the Medicaid program and knowingly [or intentionally] fails to indicate the type of license and the identification number of the licensed health care provider who actually provided the service; (9) knowingly [or intentionally] enters into an agreement, combination, or conspiracy to defraud the state by obtaining or aiding another person in obtaining an unauthorized payment or benefit from the Medicaid program or a fiscal agent; [or] (10) is a managed care organization that contracts with the Health and Human Services Commission or other state agency to provide or arrange to provide health care benefits or services to individuals eligible under the Medicaid program and knowingly [or intentionally]: (A) fails to provide to an individual a health care benefit or service that the organization is required to provide under the contract; (B) fails to provide to the commission or appropriate state agency information required to be provided by law, commission or agency rule, or contractual provision; or (C) engages in a fraudulent activity in connection with the enrollment of an individual eligible under the Medicaid program in the organization's managed care plan or in connection with marketing the organization's services to an individual eligible under the Medicaid program; [or] (11) knowingly [(D)] obstructs an investigation by the attorney general of an alleged unlawful act under this section; or (12) knowingly makes, uses, or causes the making or use of a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to this state under the Medicaid program. SECTION 4. Subsection (b), Section 36.003, Human Resources Code, is amended to read as follows: (b) Except as ordered by a court for good cause shown, the office of the attorney general may not produce for inspection or copying or otherwise disclose the contents of documentary material obtained under this section to a person other than: (1) an [authorized] employee of the attorney general; (2) an agency of this state, the United States, or another state; (3) a criminal district attorney, district attorney, or county attorney of this state; (4) the United States attorney general; [or] (5) a state or federal grand jury; (6) a political subdivision of this state; or (7) a person authorized by the attorney general to receive the information. SECTION 5. Section 36.004, Human Resources Code, is amended to read as follows: Sec. 36.004. IMMUNITY. Notwithstanding any other law, a person is not civilly or criminally liable for providing access to documentary material under this chapter to: (1) an [authorized] employee of the attorney general; (2) an agency of this state, the United States, or another state; (3) a criminal district attorney, district attorney, or county attorney of this state; (4) the United States attorney general; [or] (5) a state or federal grand jury; (6) a political subdivision of this state; or (7) a person authorized by the attorney general to receive the information. SECTION 6. Section 36.005, Human Resources Code, is amended by amending Subsections (a) and (b) and adding Subsections (b-1) and (b-2) to read as follows: (a) A health and human services agency, as defined by Section 531.001, Government Code [The commissioner of human services, the commissioner of public health, the commissioner of mental health and mental retardation, the executive director of the Department of Protective and Regulatory Services, or the executive director of another state health care regulatory agency]: (1) shall suspend or revoke: (A) a provider agreement between the [department or] agency and a person, other than a person who operates a nursing facility or an ICF-MR facility, found liable under Section 36.052; and (B) a permit, license, or certification granted by the [department or] agency to a person, other than a person who operates a nursing facility or an ICF-MR facility, found liable under Section 36.052; and (2) may suspend or revoke: (A) a provider agreement between the [department or] agency and a person who operates a nursing facility or an ICF-MR facility and who is found liable under Section 36.052; or (B) a permit, license, or certification granted by the [department or] agency to a person who operates a nursing facility or an ICF-MR facility and who is found liable under Section 36.052. (b) A provider [person] found liable under Section 36.052 for an unlawful act may not, for a period of 10 years, provide or arrange to provide health care services under the Medicaid program or supply or sell, directly or indirectly, a product to or under the Medicaid program [for a period of 10 years]. The executive commissioner of the Health and Human Services Commission [board of a state agency that operates part of the Medicaid program] may by rule: (1) provide for a period of ineligibility longer than 10 years; or (2) grant a provider a full or partial exemption from the period of ineligibility required by this subsection if the executive commissioner finds that enforcement of the full period of ineligibility is harmful to the Medicaid program or a beneficiary of the program. (b-1) The period of ineligibility begins on the date on which the determination that the provider [person] is liable becomes final. (b-2) Subsections (b) and (b-1) do [This subsection does] not apply to a provider [person] who operates a nursing facility or an ICF-MR facility. SECTION 7. Subsections (a) and (c), Section 36.052, Human Resources Code, are amended to read as follows: (a) Except as provided by Subsection (c), a person who commits an unlawful act is liable to the state for: (1) [restitution of] the amount [value] of any payment or the value of any monetary or in-kind benefit provided under the Medicaid program, directly or indirectly, as a result of the unlawful act, including any payment made to a third party; (2) interest on the amount [value] of the payment or the value of the benefit described by Subdivision (1) at the prejudgment interest rate in effect on the day the payment or benefit was received or paid, for the period from the date the benefit was received or paid to the date that [restitution is paid to] the state recovers the amount of the payment or value of the benefit; (3) a civil penalty of: (A) not less than $5,000 or more than $15,000 for each unlawful act committed by the person that results 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; or (B) not less than $1,000 or more than $10,000 for each unlawful act committed by the person that does not result in injury to a person described by Paragraph (A); and (4) two times the amount [value] of the payment or the value of the benefit described by Subdivision (1). (c) The trier of fact may assess a total of not more than two times the amount [value] of a payment or the value of a benefit described by Subsection (a)(1) if the trier of fact finds that: (1) the person furnished the attorney general with all information known to the person about the unlawful act not later than the 30th day after the date on which the person first obtained the information; and (2) at the time the person furnished all the information to the attorney general, the attorney general had not yet begun an investigation under this chapter. SECTION 8. Section 36.053, Human Resources Code, is amended by adding Subsections (c) through (f) to read as follows: (c) The office of the attorney general may not release or disclose information that is obtained under Subsection (b)(1) or (2) or any documentary material or other record derived from the information except: (1) by court order for good cause shown; (2) with the consent of the person who provided the information; (3) to an employee of the attorney general; (4) to an agency of this state, the United States, or another state; (5) to any attorney representing the state under Section 36.055 or in a civil action brought under Subchapter C; (6) to a political subdivision of this state; or (7) to a person authorized by the attorney general to receive the information. (d) The attorney general may use documentary material derived from information obtained under Subsection (b)(1) or (2), or copies of that material, as the attorney general determines necessary in the enforcement of this chapter, including presentation before a court. (e) If a person fails to file a statement as required by Subsection (b)(1) or fails to submit to an examination as required by Subsection (b)(2), the attorney general may file in a district court of Travis County a petition for an order to compel the person to file the statement or submit to the examination within a period stated by court order. Failure to comply with an order entered under this subsection is punishable as contempt. (f) An order issued by a district court under this section is subject to appeal to the supreme court. SECTION 9. Section 36.054, Human Resources Code, is amended by amending Subsection (e) and adding Subsection (e-1) to read as follows: (e) The [Except as ordered by a court for good cause shown, the] office of the attorney general may not produce for inspection or copying or otherwise disclose the contents of documentary material obtained under this section except: (1) by court order for good cause shown; (2) with the consent of the person who produced the information; (3) to an employee of the attorney general; (4) to an agency of this state, the United States, or another state; (5) to any attorney representing the state under Section 36.055 or in a civil action brought under Subchapter C; (6) to a political subdivision of this state; or (7) to a person authorized by the attorney general to receive the information [to a person other than an authorized employee of the attorney general without the consent of the person who produced the documentary material]. (e-1) The attorney general shall prescribe reasonable terms and conditions allowing the documentary material to be available for inspection and copying by the person who produced the material or by an authorized representative of that person. The attorney general may use the documentary material or copies of it as the attorney general determines necessary in the enforcement of this chapter, including presentation before a court. SECTION 10. Section 36.102, Human Resources Code, is amended by amending Subsections (b) through (e) and adding Subsection (c-1) to read as follows: (b) The petition shall be filed in camera and, except as provided by Subsection (c-1) or (d), shall remain under seal until at least the 180th [60th] day after the date the petition is filed or the date on which the state elects to intervene, whichever is earlier. The petition may not be served on the defendant until the court orders service on the defendant. (c) The state may elect to intervene and proceed with the action not later than the 180th [60th] day after the date the attorney general receives the petition and the material evidence and information. (c-1) At the time the state intervenes, the attorney general may file a motion with the court requesting that the petition remain under seal for an extended period. (d) The state may, for good cause shown, move the court to extend the 180-day deadline [time during which the petition remains under seal] under Subsection (b) or (c). A motion under this subsection may be supported by affidavits or other submissions in camera. (e) An action under this subchapter may be dismissed before the end of the period during which the petition remains under seal [prescribed by Subsection (b), as extended as provided by Subsection (d), if applicable,] only if the court and the attorney general consent in writing to the dismissal and state their reasons for consenting. SECTION 11. Section 36.103, Human Resources Code, is amended to read as follows: Sec. 36.103. ANSWER BY DEFENDANT. A defendant is not required to file in accordance with the Texas Rules of Civil Procedure an answer to a petition filed under this subchapter until [the 20th day after the date] the petition is unsealed and served on the defendant [in compliance with the Texas Rules of Civil Procedure]. SECTION 12. Subsection (a), Section 36.104, Human Resources Code, is amended to read as follows: (a) Not later than the last day of the period prescribed by Section 36.102(c) or an extension of that period as provided by Section 36.102(d), the state shall: (1) proceed with the action; or (2) notify the court that the state declines to take over the action. SECTION 13. Subsection (c), Section 36.110, Human Resources Code, is amended to read as follows: (c) A payment to a person under this section shall be made from the proceeds of the action. A person receiving a payment under this section is also entitled to receive from the defendant an amount for reasonable expenses, reasonable attorney's fees, and costs that the court finds to have been necessarily incurred. The court's determination of expenses, fees, and costs to be awarded under this subsection shall be made only after the defendant has been found liable in the action[, plus reasonable attorney's fees and costs. Expenses, fees, and costs shall be awarded against the defendant]. SECTION 14. The heading of Subchapter D, Chapter 36, Human Resources Code, is amended to read as follows:
SUBCHAPTER D. [CRIMINAL PENALTIES AND] REVOCATION OF CERTAIN OCCUPATIONAL LICENSES
SECTION 15. Subsection (b), Section 36.132, Human Resources Code, is amended to read as follows: (b) A licensing authority shall revoke a license issued by the authority to a person if the person is convicted of a felony under Section 35A.02, Penal Code [36.131]. In revoking the license, the licensing authority shall comply with all procedures generally applicable to the licensing authority in revoking licenses. SECTION 16. Title 7, Penal Code, is amended by adding Chapter 35A to read as follows:
CHAPTER 35A. MEDICAID FRAUD
Sec. 35A.01. DEFINITIONS. In this chapter: (1) "Claim" has the meaning assigned by Section 36.001, Human Resources Code. (2) "Fiscal agent" has the meaning assigned by Section 36.001, Human Resources Code. (3) "Health care practitioner" has the meaning assigned by Section 36.001, Human Resources Code. (4) "Managed care organization" has the meaning assigned by Section 36.001, Human Resources Code. (5) "Medicaid program" has the meaning assigned by Section 36.001, Human Resources Code. (6) "Medicaid recipient" has the meaning assigned by Section 36.001, Human Resources Code. (7) "Physician" has the meaning assigned by Section 36.001, Human Resources Code. (8) "Provider" has the meaning assigned by Section 36.001, Human Resources Code. (9) "Service" has the meaning assigned by Section 36.001, Human Resources Code. Sec. 35A.02. MEDICAID FRAUD. (a) A person commits an offense if the person: (1) knowingly makes or causes to be made a false statement or misrepresentation of a material fact to permit a person to receive a benefit or payment under the Medicaid program that is not authorized or that is greater than the benefit or payment that is authorized; (2) knowingly conceals or fails to disclose information that permits a person to receive a benefit or payment under the Medicaid program that is not authorized or that is greater than the benefit or payment that is authorized; (3) knowingly applies for and receives a benefit or payment on behalf of another person under the Medicaid program and converts any part of the benefit or payment to a use other than for the benefit of the person on whose behalf it was received; (4) knowingly makes, causes to be made, induces, or seeks to induce the making of a false statement or misrepresentation of material fact concerning: (A) the conditions or operation of a facility in order that the facility may qualify for certification or recertification required by the Medicaid program, including certification or recertification as: (i) a hospital; (ii) a nursing facility or skilled nursing facility; (iii) a hospice; (iv) an intermediate care facility for the mentally retarded; (v) an assisted living facility; or (vi) a home health agency; or (B) information required to be provided by a federal or state law, rule, regulation, or provider agreement pertaining to the Medicaid program; (5) except as authorized under the Medicaid program, knowingly pays, charges, solicits, accepts, or receives, in addition to an amount paid under the Medicaid program, a gift, money, a donation, or other consideration as a condition to the provision of a service or product or the continued provision of a service or product if the cost of the service or product is paid for, in whole or in part, under the Medicaid program; (6) knowingly presents or causes to be presented a claim for payment under the Medicaid program for a product provided or a service rendered by a person who: (A) is not licensed to provide the product or render the service, if a license is required; or (B) is not licensed in the manner claimed; (7) knowingly makes a claim under the Medicaid program for: (A) a service or product that has not been approved or acquiesced in by a treating physician or health care practitioner; (B) a service or product that is substantially inadequate or inappropriate when compared to generally recognized standards within the particular discipline or within the health care industry; or (C) a product that has been adulterated, debased, mislabeled, or that is otherwise inappropriate; (8) makes a claim under the Medicaid program and knowingly fails to indicate the type of license and the identification number of the licensed health care provider who actually provided the service; (9) knowingly enters into an agreement, combination, or conspiracy to defraud the state by obtaining or aiding another person in obtaining an unauthorized payment or benefit from the Medicaid program or a fiscal agent; (10) is a managed care organization that contracts with the Health and Human Services Commission or other state agency to provide or arrange to provide health care benefits or services to individuals eligible under the Medicaid program and knowingly: (A) fails to provide to an individual a health care benefit or service that the organization is required to provide under the contract; (B) fails to provide to the commission or appropriate state agency information required to be provided by law, commission or agency rule, or contractual provision; or (C) engages in a fraudulent activity in connection with the enrollment of an individual eligible under the Medicaid program in the organization's managed care plan or in connection with marketing the organization's services to an individual eligible under the Medicaid program; (11) knowingly obstructs an investigation by the attorney general of an alleged unlawful act under Section 36.002, Human Resources Code; or (12) knowingly makes, uses, or causes the making or use of a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to this state under the Medicaid program. (b) An offense under this section is: (1) a Class C misdemeanor if the amount of any payment or the value of any monetary or in-kind benefit provided under the Medicaid program, directly or indirectly, as a result of the conduct is less than $50; (2) a Class B misdemeanor if the amount of any payment or the value of any monetary or in-kind benefit provided under the Medicaid program, directly or indirectly, as a result of the conduct is $50 or more but less than $500; (3) a Class A misdemeanor if the amount of any payment or the value of any monetary or in-kind benefit provided under the Medicaid program, directly or indirectly, as a result of the conduct is $500 or more but less than $1,500; (4) a state jail felony if the amount of any payment or the value of any monetary or in-kind benefit provided under the Medicaid program, directly or indirectly, as a result of the conduct is $1,500 or more but less than $20,000; (5) a felony of the third degree if the amount of any payment or the value of any monetary or in-kind benefit provided under the Medicaid program, directly or indirectly, as a result of the conduct is $20,000 or more but less than $100,000; (6) a felony of the second degree if the amount of any payment or the value of any monetary or in-kind benefit provided under the Medicaid program, directly or indirectly, as a result of the conduct is $100,000 or more but less than $200,000; or (7) a felony of the first degree if the amount of any payment or the value of any monetary or in-kind benefit provided under the Medicaid program, directly or indirectly, as a result of the conduct is $200,000 or more. (c) If conduct constituting an offense under this section also constitutes an offense under another section of this code or another provision of law, the actor may be prosecuted under either this section or the other section or provision. (d) When multiple payments or monetary or in-kind benefits are provided under the Medicaid program as a result of one scheme or continuing course of conduct, the conduct may be considered as one offense and the amounts of the payments or monetary or in-kind benefits aggregated in determining the grade of the offense. SECTION 17. (a) Section 531.1063, Government Code, is amended by amending Subsection (g) and adding Subsections (h) and (i) to read as follows: (g) The commission shall implement [may extend] the program statewide as provided by Subsection (h) [to additional counties] if the commission determines that statewide implementation [expansion] would be cost-effective. (h) The commission shall adopt a plan to implement the program statewide in phases and shall terminate the statewide implementation at any stage of the process if the commission determines that statewide implementation would not be cost-effective. The plan must include for each phase: (1) a description of the policies and procedures to be tested concerning the handling of lost, forgotten, or stolen cards carrying a fingerprint image or situations in which a fingerprint match cannot be confirmed; (2) a determination of whether the commission will require children or persons who are elderly or disabled to participate in the phase and the reason or reasons for including children or persons who are elderly or disabled in the phase; and (3) a description of the manner and location in which the fingerprint images will be initially collected. (i) In developing the plan required by Subsection (h), the commission shall seek comments from recipients, providers, and other stakeholders in the state Medicaid program. (b) The Health and Human Services Commission, before implementing a phase of the Medicaid fraud reduction pilot program required by Section 531.1063, Government Code, as amended by this section, that requires mandatory participation by Medicaid recipients or health care providers, shall submit a report regarding the phase to the governor, lieutenant governor, speaker of the house of representatives, and presiding officer of each standing committee of the senate and house of representatives having jurisdiction over the state Medicaid program. The report must include a description of each component of the plan for that phase, as required by Subsection (h), Section 531.1063, Government Code, as added by this section. (c) In addition to the report required by Subsection (c), Section 2.23, Chapter 198, Acts of the 78th Legislature, Regular Session, 2003, the Health and Human Services Commission shall report, not later than December 1, 2006, on the status and progress of the Medicaid fraud reduction pilot program required by Section 531.1063, Government Code, as amended by this section, to the governor, lieutenant governor, speaker of the house of representatives, and presiding officer of each standing committee of the senate and house of representatives having jurisdiction over the state Medicaid program. The report must include: (1) a continued evaluation of the benefits of the program; (2) an evaluation of the strengths and weaknesses of the policies and procedures tested in each phase required by Subsection (h), Section 531.1063, Government Code, as added by this section; (3) information concerning the cost-effectiveness of the program; (4) if the program has been implemented statewide, any significant problems encountered; and (5) if the Health and Human Services Commission requires participation by children or persons who are elderly or disabled, the reason or reasons for including children or persons who are elderly or disabled in the program. (d) If before implementing any provision of this section 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 18. Subsection (d), Section 41.002, Civil Practice and Remedies Code, is amended to read as follows: (d) Notwithstanding any provision to the contrary, this chapter does not apply to: (1) Section 15.21, Business & Commerce Code (Texas Free Enterprise and Antitrust Act of 1983); (2) [,] an action brought under the Deceptive Trade Practices-Consumer Protection Act (Subchapter E, Chapter 17, Business & Commerce Code) except as specifically provided in Section 17.50 of that Act; (3) an action brought under Chapter 36, Human Resources Code;[,] or (4) an action brought under Chapter 21, Insurance Code. SECTION 19. Section 36.131, Human Resources Code, is repealed. SECTION 20. (a) This Act applies only to conduct that occurs on or after the effective date of this Act. Conduct that occurs before the effective date of this Act is governed by the law in effect at the time the conduct occurred, and that law is continued in effect for that purpose. (b) For purposes of this section, conduct constituting an offense under the penal law of this state occurred before the effective date of this Act if any element of the offense occurred before that date. SECTION 21. This Act takes effect September 1, 2005.
______________________________ ______________________________ President of the Senate Speaker of the House
I hereby certify that S.B. No. 563 passed the Senate on March 31, 2005, by the following vote: Yeas 30, Nays 0; and that the Senate concurred in House amendments on May 26, 2005, by the following vote: Yeas 31, Nays 0. ______________________________ Secretary of the Senate I hereby certify that S.B. No. 563 passed the House, with amendments, on May 23, 2005, by a non-record vote. ______________________________ Chief Clerk of the House Approved: ______________________________ Date ______________________________ Governor