Medicaid Fraud Investigations in Texas: What You Need to Know

Medicaid is a big business in Texas. Around 4.2 million Texans, or more than 15% of the state’s population, are enrolled in Medicaid and served by approximately 57,000 healthcare providers.

The Medicaid program is jointly funded by the federal and state governments. Unfortunately, hundreds of millions of dollars are lost from the state’s Medicaid program each year through fraud, abuse, or waste. In an effort to recover those funds, a variety of federal and state agencies investigate and prosecute Medicaid providers suspected or accused of fraud. In 2019 alone, the State of Texas recovered more than $604 million through settlements with or judgments against Medicaid providers.

Medicaid providers may become the subject of a criminal or civil investigation by the State of Texas if they are accused or suspected of committing fraud. Examples of Medicaid fraud include:

• A doctor billing Medicaid for X-rays, blood tests and other procedures that were never performed, or falsifying a patient’s diagnosis to justify unnecessary tests
• An ambulance company transporting Medicaid patients by ambulance when the patients can walk on their own and an ambulance is not medically necessary
• A nursing home bookkeeper writing and cashing checks for herself from residents’ trust fund accounts set up to take care of the residents’ expenses
• A pharmacist giving a Medicaid customer a generic drug and billing instead for the name brand version of the medication
• A home health agency billing Medicaid for care not given, for care given to patients who have died or who are no longer eligible, or for care given to patients who have transferred to another provider
• An orthodontist billing Medicaid for braces that were never applied
• A health clinic billing patients for services already paid for by Medicaid

The Office of Inspector General (OIG) and the Office of the Attorney General (OAG) collaborate and coordinate to identify and deter fraud, waste, and abuse in the state’s Medicaid program. The agencies regularly share resources and information about providers under investigation.

The OAG oversees a “Medicaid Fraud Control Unit” that conducts criminal investigations and a “Civil Medicaid Fraud Division” that conducts civil investigations. The OIG may refer any case of suspected Medicaid fraud to the OAG for additional review or investigation. 1 Tex. Admin. Code § 371.1701.

The OAG often works with the federal government on fraud recovery efforts. In 2019, investigative work by the OAG Medicaid Fraud Control Unit helped federal prosecutors obtain convictions and prison sentences in two home health care fraud cases against five individuals who cheated Medicaid and Medicare out of nearly $4.5 million.

In 2019, the OAG Civil Medicaid Fraud Division recovered over $163 million in Medicaid fraud cases. Notably, $117 million came from an installment payment on just one settlement, which totaled $236 million—the largest single recovery in a case filed by the OAG’s office for Medicaid-related claims. The OAG Civil Medicaid Fraud Division is continuing to pursue other significant cases, including an action against the pharmaceutical manufacturer Janssen for improper marketing of its opioid, Duragesic.

There has been an increased focus by the State of Texas on criminal prosecution of Medicaid fraud. In 2014, OIG referred 144 cases (around 15% of all referrals) to the OAG Medicaid Fraud Control Unit. By comparison, in 2019, OIG referred 382 cases (around 40% of all referrals) to OAG Medicaid Fraud Control Unit. That same year, the OAG Medicaid Fraud Control Unit obtained 72 convictions and recovered approximately $21 million in fines and restitution for Medicaid cases and over $119 million for non-Medicaid cases.

The OAG has broad authority to investigate and prosecute cases of Medicaid fraud under the Texas Medicaid Fraud Prevention Act (TMFPA). Under the TMFPA, Medicaid providers that knowingly commit “unlawful acts” are subject to substantial monetary consequences (treble actual damages, $5,500 to $11,000 for each violation, and costs of litigation) and onerous administrative sanctions, including mandatory suspension or revocation of a license, permit, certification, or state-provider agreement and exclusion from the Medicaid program for at least ten years. In re Xerox Corp., 555 S.W.3d 518, 525 (Tex. 2018).

A local district attorney or the OAG can also seek criminal penalties for Medical fraud. Under the Texas Penal Code, the punishment for a fraud conviction ranges from a misdemeanor to a felony offense. Tex. Pen. Code § 35A.02.

While real fraud does occur, many Medicaid fraud investigations are the result of honest mistakes and reasonable misunderstandings by providers or the state. With the potential for steep fines and (in some cases) criminal convictions, you should seek experienced counsel to protect your interests if you become the subject of a Medicaid fraud investigation. It’s cheaper to hire an attorney than to burn down your $1.6 million mansion in an attempt to destroy documents (like this Fort Worth doctor’s wife did).