Medicaid Fraud: Enforcement Continues to Trend Down as Labs Drift Deeper into the Background

Last month, the OIG published its annual summary of Medicaid Fraud Control Unit (MCFU) activity for FY 2017. Here is a summary of the key findings, trends and impact on labs.

The 50 MCFUs are essentially the state arm of the OIG in charge of investigating and prosecuting provider Medicaid fraud and patient abuse violations. Each year, the OIG issues a report documenting aggregate MCFU case outcomes for the prior year including convictions, civil settlements, judgments and recoveries.

Criminal Convictions
At 1,528, total MCFU convictions remain flat over a five-year period with fraud accounting for 73% of all convictions.

Table 1: MCFU Convictions FY 2013-2017

Of last year’s 1,157 fraud convictions, 523 (45%) involved personal care service (PSC) attendants and agencies, by far the highest of any provider group, followed by nurses (88), home health agencies (54) and family practice physicians (36).

Labs were down on the list, accounting for only 12 convictions (8 clinical labs and 4 radiology and physiology labs).

Criminal Recoveries
While the number of convictions was consistent with previous years, criminal recoveries were $693 million, nearly double FY 2016 levels.

Table 2: MCFU Criminal Recoveries FY 2013-2017

Most of this money—about $519 million—came from one big case in Texas involving a doctor and other codefendants who defrauded Medicaid and Medicare by improperly recruiting individuals and falsifying medical documents.

Labs contributed roughly $5.443 million to total criminal recoveries with $3.396 coming from the 8 convicted clinical labs and the remaining $2.047 million from the 4 convicted radiology and physiology labs.

Civil Settlements & Judgments
Continuing recent trends, the number of civil settlements and judgments was slightly down at 961.

Table 3: MCFU Civil Settlements & Judgments FY 2013-2017

Pharmaceutical makers was the segment with the most settlements and judgements in with 426 (44%) followed by pharmacies (137), DME suppliers (37), PCS attendants and agencies (34) and medical device makers (28).

Labs accounted for 10 settlements and judgments, 8 involving clinical labs and 2 involving radiology and physiology labs.

Civil Recoveries
Unlike the criminal side where the decline in convictions belied the spike in recoveries, civil recoveries mirrored the decrease in settlements and judgments dipping to $1.1 billion, as compared to $1.5 billion in FY 2016 and below the annual $1.2 billion average during the overall five-year period. 

Table 4: MCFU Civil Recoveries FY 2013-2017

Labs paid out just over $13 million in civil recoveries, with 8 clinical labs contributing roughly $6.268 million and 2 radiology and physiology labs another $6.750 million.

Takeaway: Medicaid fraud enforcement at the MCFU level remains steady and even in modest decline. And while labs are still drawing attention, they appear to be becoming a relatively marginal target as MCFUs focus more on the PCS and pharmaceutical sector. However, the opioid imperative is likely to turn those trends around given the lab’s role in urine drug testing.


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