                                                                                    ACCEPTED
                                                                              03-13-00526-CV
                                                                                      3738137
                                                                     THIRD COURT OF APPEALS
                                                                               AUSTIN, TEXAS
                                                                          1/12/2015 4:11:39 PM
                                                                             JEFFREY D. KYLE
                                                                                        CLERK
                       No. 03-13-00526-CV
                  ____________________________
                                                           RECEIVED IN
IN THE COURT OF APPEALS FOR THE THIRD DISTRICT      OF OF
                                             3rd COURT   TEXAS
                                                            APPEALS
                                                 AUSTIN, TEXAS
                      AUSTIN, TEXAS
                                             1/12/2015 4:11:39 PM
                ____________________________
                                                          JEFFREY D. KYLE
                                                               Clerk
                         PHARMSERV, INC.
                             APPELLANT,

                                  V.

 TEXAS DEPARTMENT OF HEALTH AND HUMAN SERVICES, AND
OFFICE OF THE INSPECTOR GENERAL OF THE TEXAS HEALTH AND
        HUMAN SERVICES COMMISSION, DOUG WILSON
                  AND KYLE L. JANEK, M.D.
                           APPELLEES.
                  ____________________________
BRIEF AMICUS CURIAE OF SOUTHWEST PHARMACY SOLUTIONS
              d/b/a AMERICAN PHARMACIES
             IN SUPPORT OF THE APPELLANT
               ____________________________
                         On Appeal from the
             st
          261 Judicial District Court of Travis County, Texas
                   Cause No. D-1-GN-12-001074
                 ____________________________
                              TAYLOR DUNHAM AND RODRIGUEZ, LLP
                              301 CONGRESS AVENUE, SUITE 1050
                              AUSTIN, TEXAS 78701
                              (512) 473-2257 TELEPHONE
                              (512) 478-4409 FACSIMILE
                              MIGUEL S. RODRIGUEZ
                              STATE BAR NO. 24007938
                              MRODRIGUEZ@TAYLORDUNHAM.COM

                              ATTORNEYS FOR SOUTHWEST PHARMACY
                              SOLUTIONS, INC. D/B/A AMERICAN
                              PHARMACIES
                IDENTITY OF PARTIES AND COUNSEL

1.   Petitioner/Appellant/Plaintiff

     Pharmserv, Inc.

           Represented by:

           Jeff Avant
           Avant & Mitchell, L.P.
           700 Lavaca, Suite 1400
           Austin, Texas 78701
           (512) 478-5757 Telephone
           (512) 478-5404 Facsimile
           avantlaw@swbell.net

                 and

           Hugh Barton
           Hugh M. Barton, P.C.
           603 West 13th St., Ste 1B
           Austin, Texas 78701
           (512) 499-0793 Telephone
           (512) 727-6717 Facsimile
           bartonlaw@yahoo.com



2.   Respondents/Appellees/Defendants

           Texas Health and Human Services Commission
           Office of Inspector General of the Texas Health and Human Services
           Commission
           Dr. Kyle Janak, Appellee, in his official capacity currently acting as
           Executive Commissioner of the TxHHSC
           Mr. Douglas Wilson, in his official capacity as Inspector
           General of the Office of Inspector General Office of TxHHSC

           Represented by:



                                       i
          Ann Hartley
          Assistant Attorney General of the Financial,
          Tax and Litigation Section or the Texas Office of the Attorney
          General
          P.O. Box 12548
          Austin, Texas 78711-2548
          (512) 936-1313 Telephone
          (512) 477-2348 Facsimile
          ann.hartley@texasattorneygeneral.gov



3.   Amicus Curiae

     Southwest Pharmacy Solutions, Inc. d/b/a American Pharmacies

          Represented by:

          Miguel S. Rodriguez
          Taylor Dunham and Rodriguez, LLP
          301 Congress Avenue, Suite 1050
          Austin, Texas 78701
          (512) 473-2257 Telephone
          (512) 478-4409 Facsimile
          mrodriguez@taylordunham.com




                                      ii
                                         TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL .............................................................i 

TABLE OF CONTENTS ......................................................................................... iii 

INDEX OF AUTHORITIES.....................................................................................iv 

INTEREST OF AMICUS CURIAE............................................................................ 1 

SUMMARY OF THE ARGUMENT ........................................................................ 2 

ARGUMENT ............................................................................................................. 4 

CONCLUSION .......................................................................................................... 8 

CERTIFICATE OF COMPLIANCE ......................................................................... 9 

CERTIFICATE OF SERVICE .................................................................................. 9 

APPENDIX .............................................................................................................. 10 




                                                           iii
                                   INDEX OF AUTHORITIES

                                                                                                     Page(s)

Statutes
TEX. GOV’T CODE § 2001.003(1) ............................................................................... 6

TEX. GOV’T CODE § 2001.171.................................................................................... 6



Rules
1 TEX. ADMIN. CODE § 371.1601(18) (eff. 1/9/2005) ................................................ 6

1 TEX. ADMIN. CODE § 371.1601(33) (eff. 1/9/2005) ................................................ 7

1 TEX. ADMIN. CODE § 371.1601(41) (eff. 1/9/2005) ................................................ 6

1 TEX. ADMIN. CODE § 371.1601(45) (eff. 1/9/2005) ................................................ 4

1 TEX. ADMIN. CODE § 371.1603(f) (eff. 1/9/2005) .................................................. 7

1 TEX. ADMIN. CODE § 371.1603(j)(2) (eff. 1/9/2005) .............................................. 5

1 TEX. ADMIN. CODE § 371.1613 (eff. 1/9/2005) ...................................................... 7

1 TEX. ADMIN. CODE § 371.1643(c) (eff. 1/9/2005) .................................................. 5

1 TEX. ADMIN. CODE § 371.1647(c) and (d)(5) (eff. 1/9/2005) ................................. 6

1 TEX. ADMIN. CODE § 371.1667(a) (eff. 1/9/2005) .................................................. 6

1 TEX. ADMIN. CODE § 371.1667(b) (eff. 1/9/2005) .................................................. 6

1 TEX. ADMIN. CODE § 371.1669(a) (eff. 1/9/2005) .................................................. 6

1 TEX. ADMIN. CODE § 371.1709(h) (eff. 4/10/11) .................................................... 7

1 TEX. ADMIN. CODE § 371.1719(d)(4) (eff. 4/10/11) ............................................... 7




                                                      iv
                        INTEREST OF AMICUS CURIAE

      American Pharmacies is a for-profit, member-owned, independent pharmacy

cooperative with over 600 members operating in several states, including Texas.

PharmServ, Inc. is one of American Pharmacies’ members. The vast majority of

the members of American Pharmacies are pharmacy providers in the Texas

Medicaid Vendor Drug Program overseen by the Texas Health and Human

Services Commission (“HHSC”).        From time to time, many of the pharmacy

providers who are members of American Pharmacies are the subject of audits by

the HHSC Office of Inspector General (“HHSC-OIG”) and, in some cases, the

HHSC-OIG seeks recoupment for alleged overpayments.             Many of those

recoupment allegations include the use of a sampling process to extrapolate the

findings of an audit across a population of unaudited claims.

      American Pharmacies devotes significant resources to advocating in the

legislature and the courts of Texas to advance and protect the interests of its

member-pharmacies. American Pharmacies has no parent corporation, and no

publicly held corporation owns 10% or more of its stock.

      This brief is being submitted in support of Appellant.

      American Pharmacies is the source of all fees paid or to be paid for

preparing this brief.
                          SUMMARY OF THE ARGUMENT

       American Pharmacies respectfully submits this brief as a friend of the Court

to bring to the Court’s attention an area of analysis not closely focused upon by the

parties to this appeal.

      The members of American Pharmacies, a purchasing cooperative, are

independent pharmacies.      These are small businesses, often owned by the

pharmacist behind the counter. They stand ready to serve their community and are

an integral component of the delivery of health care services. Appellant is just one

of hundreds of other independently-owned small-business pharmacies in Texas

serving the Medicaid population. The HHSC-OIG audits of these pharmacies

often identify small clerical errors on a script (a missing date, word or notation)

that most often do not question the fact that a patient received the correct

medication and that the State was billed the correct amount for the quantity of

medication dispensed to the patient. Therefore, the “overpayments” imposed as

sanctions act to recoup money from the pharmacy even though the pharmacy has

already unquestionably provided medicine to the patient.          As a result, the

pharmacy is left without its inventory and its revenue.

      However, the imposition of monetary sanctions of hundreds of thousands of

dollars or more (as a result of extrapolated findings from a sampling process) is, in

most cases, a death sentence to such a business. The HHSC regulations in effect in



                                          2
2010, the time that HHSC imposed its administrative sanctions upon Appellant,

provided that Medicaid providers such as Appellant would be afforded due

process.

       The thrust of the argument of HHSC-OIG is that it may impose an

administrative sanction upon Appellant but give the sanction a different label to

avoid providing the required due process.

      However, HHSC-OIG’s demand for nearly $1 million in payments from

Appellant and the imposition of a hold on any future payments to Appellant is

within the direct ambit of the definition of an “administrative sanction” set forth in

the regulations applicable to Appellant at the time of their imposition in 2010.

      Whether HHSC-OIG’s demand for the return of such amounts is the result

of a claim of fraud or clerical error is of no moment in the analysis.             The

regulations plainly state that demands for recoupment of overpayments, including

the withholding of future payments, are administrative sanctions which require a

right of a formal appeal hearing to be afforded to the provider prior to their

imposition.

      The requirement to provide such due process protections is important not

just to the Appellant in this case, but to the hundreds of other small business

pharmacies subject to audit by HHSC-OIG.




                                          3
      Because HHSC-OIG’s duty to provide a right to a formal appeal hearing and

judicial review is nondiscretionary, jurisdiction exists to compel such forms of due

process.

                                  ARGUMENT

A.    In 2010, HHSC-OIG Imposed “Administrative Sanctions” Upon
      Appellant.

      As reflected in the record, on October 13, 2010, HHSC-OIG declared that

“[a]fter summarizing the audit exceptions and extrapolating to the population (the

error rate and amounts) the Office of the Inspector General determined that the

Vendor owes the State of Texas $900.916.96.” (Clerk’s Record at page 40). In its

letter, HHSC-OIG (1) demanded payment in the amount of $900,916.96 within

thirty days and (2) indicated that a hold would be placed on the Appellant’s claims

if payment was not received by the due date or a payment plan could not be agreed

upon. (Clerk’s Record at pages 57-58). In other words, by this letter, HHSC-OIG

was seeking recoupment of $900,916.96 in alleged overpayments and instituting a

payment hold on future payments to the Pharmacy.

      The regulations in effect at the time defined such a demand for payment and

utilization of a hold on payment as “administrative sanctions” subject to an

entitlement to due process.

      Specifically, the demand for payment of $900,916.96 and hold on future

payments constituted a “recoupment of overpayment.” See 1 TEX. ADMIN. CODE §

                                         4
371.1601(45) (eff. 1/9/2005) (emphasis added) (defining a “recoupment of

overpayment” as a “sanction imposed to recover funds paid to the provider or

person to which they were not entitled” and describing the recoupment as either

being taken in a lump sum, monthly payments or a reduction of payments to the

provider, in full or in part).

       The regulations further provided that a recoupment of overpayments,

including a “recoupment of overpayments projected from a sampling process” (as

was performed in this case), are “administrative sanctions.” See 1 TEX. ADMIN.

CODE § 371.1643(c) (eff. 1/9/2005).

B.     In 2010, the Imposition of Administrative Sanctions Triggered Due
       Process Rights Including an Opportunity for a “Formal Appeal
       Hearing.”

       HHSC’s regulations in effect in 2010 recognized the seriousness of the

power given to HHSC-OIG to impose sanctions on a provider. As a result, the

same regulations which granted HHSC-OIG such power also required that the

provider be afforded due process notice and hearing requirements.

       (2)Sanctions – Sanctions may directly impact a person's ability to keep or
       receive payments and/or the person's participation in the Medicaid program;
       e.g., exclusion from program participation, recoupment of overpayments,
       or payment hold. Imposition of sanctions triggers due process notice
       and hearing requirements.

1 TEX. ADMIN. CODE § 371.1603(j)(2) (eff. 1/9/2005) (emphasis added).




                                        5
       The Inspector General affords, to any provider1 or person against
       whom it imposes sanctions, all administrative and judicial due process
       remedies applicable to administrative sanctions.

1 TEX. ADMIN. CODE § 371.1667(a) (eff. 1/9/2005) (emphasis added). Upon the

Inspector General’s final determination of a sanction against a provider, such as a

pharmacy, the Inspector General must provide written notice to the provider of its

right to a formal appeal hearing. 1 TEX. ADMIN. CODE § 371.1647(c) and (d)(5)

(eff. 1/9/2005).

       “The provider . . . may choose to request an informal review, a formal

appeal hearing, or both.” 1 TEX. ADMIN. CODE § 371.1667(b) (eff. 1/9/2005).2

This “formal appeal hearing” clearly sets forth the type of “contested case” subject

to the procedural requirements of the Administrative Procedures Act. TEX. GOV’T

CODE § 2001.003(1). Moreover, the resolution of such a contested case would

afford the provider an opportunity for judicial review.                  TEX. GOV’T CODE

§2001.171.3



       1
           Pharmacies in the Vendor Drug Program meet the definition of “providers” under
Subchapter G. 1 TEX. ADMIN. CODE § 371.1601(41) (eff. 1/9/2005) (defining “provider” as
including person providing services to an HHS agency); 1 TEX. ADMIN. CODE § 371.1601(18)
(eff. 1/9/2005) (defining “HHS” as including the Commission and any other program or division
under the Commission’s umbrella).
       2
         Upon receiving a provider’s notice of appeal, the Inspector General must then “forward
the notice of appeal to the Commission’s Office of General Counsel for docketing.” 1 TEX.
ADMIN. CODE § 371.1669(a) (eff. 1/9/2005).
       3
         This amicus brief focuses on the regulations in effect at the time that HHSC-OIG issued
its administrative sanction against Appellant. The regulations in effect today likewise provide


                                               6
C.     A Right to Formal Appeal Hearing Does Not Require an Allegation of
       Fraud.

       The right to appeal an administrative sanction is not dependent on an

allegation of fraud. See 1 TEX. ADMIN. CODE § 371.1601(33) (eff. 1/9/2005) (“Any

funds received greater than that to which the provider is entitled, whether obtained

through error, misunderstanding, abuse, or fraud is considered to be an

overpayment”); see also 1 TEX. ADMIN. CODE § 371.1603(f) (eff. 1/9/2005) (“Not

all actions resulting in overpayment to a provider are necessarily fraudulent.”); 1

TEX. ADMIN. CODE § 371.1613 (eff. 1/9/2005) (“Unintentional program violations

are subject to administrative actions and sanctions.”).         Most program violations

which result in an allegation of overpayment do not result in the pharmacy

provider receiving more compensation than was otherwise due. For example, often

HHSC-OIG makes a claim for overpayment as a result of a prescription not being

dated, a telephonic refill not being noted on the original prescription, or a quantity

not being written on the prescription in both word and numeric form (i.e., “thirty

(30) tablets”). Each of these types of alleged errors do not result in the patient

receiving more medicine than he or she should have or the pharmacy being paid

more than it should have.         However, HHSC-OIG still claims each to be an

“overpayment.”


for due process through notice and a formal hearing. See 1 TEX. ADMIN. CODE § 371.1719(d)(4)
and its predecessor 1 TEX. ADMIN. CODE § 371.1709(h) (eff. 4/10/11).


                                             7
      Therefore, it is not sufficient to claim that only those charged with fraud

may obtain an informal appeal hearing.

                                  CONCLUSION

      For the foregoing reasons, Amicus American Pharmacies respectfully

requests that the Court receive this brief and consider the arguments raised herein.



                                       Respectfully submitted,

                                       TAYLOR DUNHAM AND RODRIGUEZ, LLP
                                       301 Congress Avenue, Suite 1050
                                       Austin, Texas 78701
                                       Telephone: (512) 473-2257
                                       Telecopier: (512) 478-4409



                                       By:    /s/ Miguel S. Rodriguez
                                              Miguel S. Rodriguez
                                              State Bar No. 24007938
                                              mrodriguez@taylordunham.com

                                       ATTORNEYS   FOR  SOUTHWEST
                                       PHARMACY SOLUTIONS, INC. d/b/a
                                       AMERICAN PHARMACIES




                                          8
                     CERTIFICATE OF COMPLIANCE

      In compliance with T.R.A.P. 9.4(i)(2), this brief contains 1,602 words,
excluding the portions of the brief exempted by Rule 9.4(i)(l).


                                     /s/ Miguel S. Rodriguez
                                     Miguel S. Rodriguez



                          CERTIFICATE OF SERVICE

      This is to certify that a copy of the foregoing document was served on all
counsel of record by delivering a true and correct copy via electronic service and
U.S. First Class Mail on this the 12th day of January, 2015, as follows:

Jeff Avant                              Ann Hartley
Avant & Mitchell, L.P.                  Assistant Attorney General of the
700 Lavaca, Suite 1400                  Financial,
Austin, Texas 78701                     Tax and Litigation Section or the Texas
(512) 478-5757 Telephone                Office of the Attorney
(512) 478-5404 Facsimile                General
avantlaw@swbell.net                     P.O. Box 12548
                                        Austin, Texas 78711-2548
      and                               (512) 936-1313 Telephone
                                        (512) 477-2348 Facsimile
Hugh Barton                             ann.hartley@texasattorneygeneral.gov
Hugh M. Barton, P.C.
603 West 13th St., Ste 1B               Attorneys for Appellees
Austin, Texas 78701
(512) 499-0793 Telephone
(512) 727-6717 Facsimile
bartonlaw@yahoo.com

Attorneys for Appellant


                                     /s/ Miguel S. Rodriguez
                                     Miguel S. Rodriguez

                                        9
                             APPENDIX

Tab 1   1 TEX. ADMIN. CODE § 371.1601 (eff. 1/9/2005)

Tab 2   1 TEX. ADMIN. CODE § 371.1603 (eff. 1/9/2005)

Tab 3   1 TEX. ADMIN. CODE § 371.1613 (eff. 1/9/2005)

Tab 4   1 TEX. ADMIN. CODE § 371.1643 (eff. 1/9/2005)

Tab 5   1 TEX. ADMIN. CODE § 371.1647 (eff. 1/9/2005)

Tab 6   1 TEX. ADMIN. CODE § 371.1667 (eff. 1/9/2005)

Tab 7   1 TEX. ADMIN. CODE § 371.1669 (eff. 1/9/2005)




                                  10
                APPENDIX

                   Tab 1

1 TEX. ADMIN. CODE § 371.1601 (eff. 1/9/2005)
1/9/2015                                                       Texas Administrative Code


   <<Back
              Historical Rule for the Texas Administrative Code
   TITLE 1                          ADMINISTRATION
   PART 15                          TEXAS HEALTH AND HUMAN SERVICES COMMISSION
   CHAPTER 371                      MEDICAID AND OTHER HEALTH AND HUMAN SERVICES FRAUD
                                    AND ABUSE PROGRAM INTEGRITY
   SUBCHAPTER G                     LEGAL ACTION RELATING TO PROVIDERS OF MEDICAL
                                    ASSISTANCE
   DIVISION 1                       FRAUD OR ABUSE AND ADMINISTRATIVE ENFORCEMENT
                                    INVOLVING MEDICAID AND OTHER HEALTH AND HUMAN
                                    SERVICES PROGRAMS
   RULE §371.1601                   Definitions
   Repealed Date:                   10/14/2012


   The following words and terms, when used in this subchapter, shall have the following meanings, unless
   the context clearly indicates otherwise.

     (1) Abuse­­Practices that are inconsistent with sound fiscal, business, or medical practices and that
   result in unnecessary program cost or in reimbursement for services that are not medically necessary; do
   not meet professionally recognized standards for health care; or do not meet standards required by
   contract, statute, regulation, previously sent interpretations of any of the items listed, or authorized
   governmental explanations of any of the foregoing.

     (2) Affiliates­­Persons associated with one another so that any one of them directly or indirectly
   controls or has the power to control another in whole or in part or meets any portion of the definition for
   "Affiliate Relationship" established at §371.1643 of this subchapter relating to Use of Sanctions.

     (3) Agent­­Any person, company, firm, corporation, employee, independent contractor, or other entity
   or association legally acting for or in the place of another person or entity.

     (4) At the time of the request­­A requirement to produce requested records immediately upon request
   and without delay.

     (5) CHIP­­Children's Health Insurance Program.

     (6) Claim­­Requests for payment or reimbursement related to services or items delivered within the
   Medicaid or other HHS programs, which are submitted by a provider to the Medicaid or other HHS
   program claims administrator or an operating agency either directly by a provider or indirectly through a
   managed care organization.

     (7) Claims Administrator­­The entity designated by an operating agency to process and pay Medicaid
   provider claims.

     (8) Closed­end Contract­­A contract or provider agreement for a specific period of time. It may include
   any specific requirements or provisions deemed necessary by the Inspector General to ensure the
   protection of the program. It must be renewed for the provider to continue to participate in the Medicaid

http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118663&p_tloc=&p_ploc=&pg=1&p_tac=118663&ti=1&pt=15&c…   1/5
1/9/2015                                                       Texas Administrative Code

   or other HHS program.

     (9) Commission­­The Texas Health and Human Services Commission.

     (10) Controlled substances­­"Controlled substance" as defined by the Texas Controlled Substances Act
   (Texas Health and Safety Code, Chapter 481) or its successor and the Federal Controlled Substances Act
   (21 USCA §8.01 et seq.) or its successor.

     (11) Conviction or convicted­­A person is considered to have been convicted when:

       (A) A judgment of conviction has been entered against an individual or entity by a federal, state, or
   local court, regardless of whether:

         (i) There is a post­trial motion or an appeal pending, or

         (ii) The judgment of conviction or other record relating to the criminal conduct has been expunged
   or otherwise removed;

       (B) A federal, state, or local court has made a finding of guilty against an individual or entity;

       (C) A federal, state, or local court has accepted a plea of guilty or nolo contendere by an individual or
   entity; or

       (D) An individual or entity has entered into participation in a first offender, deferred adjudication or
   other program or arrangement where judgment of conviction has been withheld.

     (12) Exclusion­­Means that items or services furnished, ordered, or prescribed by a specified individual
   or entity will not be reimbursed under Medicare, Medicaid and all other state health and human services
   programs until the individual or entity is reinstated by the Inspector General. When excluded, any
   provider participation contract/agreement with the excluded person or in which the excluded person is
   affiliated that entitles that person to participate as a provider or contractor, due to the enrollment
   process, is canceled. The cancellation would not apply to any settlement agreements or agreements for
   other purposes that were signed by the provider or contractor. An excluded provider ceases to be a
   "provider", as defined in this section, upon the effective date of their exclusion, thus for purposes of this
   subchapter, they become a "person", as defined in this section.

     (13) Failure to grant immediate access­­The failure to grant access to records, documents, or premises,
   upon reasonable request and as requested, for the purpose of reviewing, examining, and securing
   custody of records, access to, disclosure of, and custody of copies or originals of any records,
   documents, or other requested items, and others specified in §371.1643(f) of this subchapter, as
   determined necessary by the Inspector General or those specified in §371.1643(f) of this subchapter to
   perform statutory functions. Further definition and clarification is provided in §371.1643(f) and
   §371.1617(2) of this subchapter.

     (14) False statement or misrepresentation­­Any statement or representation that is inaccurate,
   incomplete, or not true.

     (15) Federal financial participation (FFP)­­The federal government's share of a state's expenditures
   under the Medicaid and other HHS programs and other benefit programs.

     (16) Fraud­­Any act that constitutes fraud under applicable federal or state law, including any
   intentional deception or misrepresentation made by a person with the knowledge that the deception
http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118663&p_tloc=&p_ploc=&pg=1&p_tac=118663&ti=1&pt=15&c…   2/5
1/9/2015                                                       Texas Administrative Code

   could result in some unauthorized benefit to that person or some other person.

     (17) Health Maintenance Organization (HMO)­­A public or private organization organized under state
   law that is a federally qualified HMO or that meets the definition of HMO within this state's Medicaid
   plan.

     (18) HHS­­A health and human service agency under the umbrella of the Health and Human Services
   Commission (the Commission), including the Commission, a program or service provided under the
   authority of the Commission or a health and human service agency, including those agencies delineated
   in §531.001.

     (19) Immediate Access­­Is deemed to include the provisions established by §371.1617(2) and
   §371.1643(f) of this subchapter.

     (20) Immediate family member­­A person's spouse (husband or wife); natural or adoptive parent; child
   or sibling; stepparent, stepchild, stepbrother or stepsister; father­, mother­, daughter­, son­, brother­ or
   sister­in­law; grandparent or grandchild; or spouse of a grandparent or grandchild.

     (21) Indirect ownership interest­­Includes an ownership interest through any other entities that
   ultimately have an ownership interest in the provider or person, as defined in this section, at issue. (For
   example, an individual has a 10 percent ownership interest in the entity at issue if they have a 20 percent
   ownership interest in a corporation that wholly owns a subsidiary that is a 50 percent owner of the entity
   at issue.)

     (22) Inducement­­An attempt to entice or lure an action on the part of another in exchange for, without
   limitation, a service, cash in any amount, entertainment, or any item of value.

     (23) Inpatient institutional services­­Inpatient services provided by hospitals and long­term care
   facilities.

     (24) Licensing authority adverse action­­Any action by a state or federal licensing entity (including
   other similar authority) against conduct that adversely affects the status of the license. Action includes
   revocation or suspension of a license as well as reprimand, censure, or probation.

     (25) Managed Care Organization (MCO)­­Any person that is authorized or otherwise permitted by law
   to arrange for or provide a managed care plan.

     (26) Managed Care Plan­­A plan under which a person undertakes to provide, arrange for, pay for, or
   reimburse any part of the cost of any health care service. A part of the plan must consist of arranging for
   or providing health care services on a prepaid basis through insurance or otherwise, as distinguished
   from indemnification against the cost of those services.

     (27) Medicaid Fraud Control Unit (MFCU)­­The division within the attorney general's office that is
   responsible for investigating suspected Medicaid provider fraud and physical abuse or neglect of
   patients in institutional settings.

     (28) Medicaid Provider Integrity Division (MPI)­­The division within the Commission's Office of
   Inspector General (OIG) that investigates provider or contractor fraud and abuse in Medicaid and other
   HHS programs.

     (29) Member of Household­­With respect to a person, as defined in this section, with whom they are
   sharing a common abode as part of a single­family unit, including domestic employees, partners, and
http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118663&p_tloc=&p_ploc=&pg=1&p_tac=118663&ti=1&pt=15&c…   3/5
1/9/2015                                                       Texas Administrative Code

   others who live together as a family unit.

     (30) Office of Inspector General (OIG)­­The office within the Commission responsible for the
   investigation of fraud and abuse and with ensuring program integrity within the Texas Medicaid
   program and other health and human services provided by the state and the enforcement of state law
   relating to the provision of those services.

     (31) Open­end Provider Agreement­­An agreement that has no specific termination date and continues
   in force as long as both parties agree.

     (32) Operating agency­­A state agency that operates any part of the Texas Medicaid or other HHS
   program.

     (33) Overpayment­­The amount paid by Medicaid or other HHS program to a provider or person that
   exceeds the amount to which the provider or person is entitled under §1902 of the Social Security Act or
   other state or federal statutes for a service or item furnished within the Medicaid or other HHS
   programs, and that is required to be refunded under §1903 of the Social Security Act or any other
   statute. This also includes all overpayments specified in division 5 of this subchapter. Any funds
   received greater than that to which the provider is entitled, whether obtained through error,
   misunderstanding, abuse, or fraud is considered to be an overpayment.

     (34) Ownership interest­­An interest in the capital, the stock or the profits of the entity or any
   mortgage, deed, trust or note, or other obligation secured in whole or in part by the property or assets of
   the person, as defined in this section.

     (35) Payment Hold (Suspension of Payments)­­An administrative sanction that withholds all or any
   portion of payments due a provider until the matter in dispute, including all investigation and legal
   proceedings, between the provider and the Commission or an operating agency or its agent(s) are
   resolved. This is a temporary denial of reimbursement under the Medicaid or other HHS program for
   items or services furnished by a specified provider.

     (36) Person­­An individual, firm, association, partnership, corporation, agency, institution, or other
   organization or legal entity.

     (37) Probationary Contract­­A contract or provider agreement for any period of time. It may include
   any special requirements or provisions deemed necessary by the Inspector General to ensure the
   protection of the program. It must be renewed by the Inspector General for the provider to continue to
   participate in the program.

     (38) Practitioner­­A physician or other individual licensed or certified under state law to practice their
   profession.

     (39) Professionally Recognized Standards of Health Care­­Statewide or national standards of care,
   whether in writing or not, that professional peers of the individual or entity whose provision of care is an
   issue, recognize as applying to those peers practicing or providing care within the State of Texas. When
   the Food and Drug Administration (FDA), the Centers for Medicare and Medicaid Services (CMS), or
   the Public Health Service (PHS), has declared a treatment modality not to be safe and effective, persons
   who employ such a treatment modality will be deemed not to meet professionally recognized standards
   of health care. This definition shall not be construed to mean that all other treatments meet
   professionally recognized standards.

     (40) Program Violation­­A failure to comply with a Medicaid or other HHS provider contract or
http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118663&p_tloc=&p_ploc=&pg=1&p_tac=118663&ti=1&pt=15&c…   4/5
1/9/2015                                                       Texas Administrative Code

   agreement, the Texas Medicaid Provider Procedures Manual or other official program publications or
   any state or federal statute or regulation applicable to the Texas Medicaid or other HHS program,
   including any official written explanation or interpretation of the above. Fraud and abuse are program
   violations, but not all program violations are included in fraud and abuse. Program violations are
   delineated in §371.1617 of this subchapter (relating to Program Violations).

     (41) Provider­­

       (A) Any person or legal entity, including a managed care organization and their subcontractors,
   furnishing Medicaid or other HHS services under a provider agreement or contract in force with a
   Medicaid or other HHS operating agency, and who has a provider number issued by the Commission or
   by any HHS agency or program or their designee to:

         (i) provide medical assistance, Medicaid, or any other HHS service in any HHS program under
   contract or provider agreement with the Commission, its designee, or a health and human service
   agency; or

         (ii) provide third­party billing services under a contract or provider agreement with the Commission
   or its designee.

       (B) An excluded provider ceases to be a "provider," as defined in this section, upon the effective date
   of their exclusion, thus for purposes of this subchapter, they become a "person", as defined in this
   section.

     (42) Provisional Contract­­A contract or provider agreement for any period of time. It may include any
   special requirements or provisions deemed necessary by the Inspector General to ensure the protection
   of the program. It must be renewed by the Inspector General for the provider to continue to participate
   in the program.

   Cont'd...


                                                  Next Page       Previous Page

                         |                            |                                              |




http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118663&p_tloc=&p_ploc=&pg=1&p_tac=118663&ti=1&pt=15&c…   5/5
1/9/2015                                                       Texas Administrative Code


   <<Back
              Historical Rule for the Texas Administrative Code
   TITLE 1                          ADMINISTRATION
   PART 15                          TEXAS HEALTH AND HUMAN SERVICES COMMISSION
   CHAPTER 371                      MEDICAID AND OTHER HEALTH AND HUMAN SERVICES FRAUD
                                    AND ABUSE PROGRAM INTEGRITY
   SUBCHAPTER G                     LEGAL ACTION RELATING TO PROVIDERS OF MEDICAL
                                    ASSISTANCE
   DIVISION 1                       FRAUD OR ABUSE AND ADMINISTRATIVE ENFORCEMENT
                                    INVOLVING MEDICAID AND OTHER HEALTH AND HUMAN
                                    SERVICES PROGRAMS
   RULE §371.1601                   Definitions
   Repealed Date:                   10/14/2012

     (43) Reasonable request­­A request for the provider or person to provide original records and
   documents, or copies of original records and documents, or access to records, documents, or premises,
   as specified in §371.1643(f) of this subchapter, made by a properly identified agent of the Commission
   or another state or federal agency identified in §371.1643(f) of this subchapter, during hours that the
   business or premises is open for business.

     (44) Recipient­­A person eligible for and covered by the Medicaid or any other HHS program.

     (45) Recoupment of overpayment­­A sanction imposed to recover funds paid to the provider or person
   to which they were not entitled. Recoupment of overpayments may be accomplished through a lump
   sum or monthly payments by the provider or person to the Inspector General or, with the approval of the
   Inspector General, a provider's or person's payments may be reduced by a percentage, up to 100% of
   payments, to apply the unpaid funds to offset the overpayment owed. The recoupment will apply to all
   previously submitted, pending, and subsequently submitted claims to offset overpayments previously
   made to the provider or person. Some HHS programs may not have the full range of recoupment
   options.

     (46) Requesting Agency­­A governmental agency (or its authorized representative or agent) that is
   authorized to review and reasonably is asking to see a provider's documentation or records or that is
   directed or otherwise authorized by federal or state statute to review medical records and/or other
   documentation that providers must maintain and disclose to such agencies in order to participate in the
   or other HHS program and records and documents necessary for the Office of Inspector General to
   fulfill its statutory mandates to review and investigate providers and persons for fraud and abuse; e.g.,
   the Commission, the relevant operating agency, Texas Attorney General's Medicaid Fraud Control Unit,
   U.S. Department of Health and Human Services. See also the definition for "Reasonable Request" listed
   in paragraph (43) of this section.

     (47) Restricted reimbursement­­An administrative sanction that limits or denies payment of a
   provider's Medicaid or other HHS program claims for specific procedures for a specified time period for
   services that the provider has abused or has billed inappropriately. The provider may be eligible to be
   paid for certain other services.

     (48) Services­­The types of medical assistance specified in section 1905(a) of the Social Security Act
http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=T&app=3&p_dir=F&p_rloc=118663&p_tloc=14868&p_ploc=1&pg=2&p_tac=118663&ti=1&…   1/3
1/9/2015                                                       Texas Administrative Code

   (42 U.S.C. §1396d (a)) and other HHS program services authorized under federal and state statutes that
   are administered by the Commission and other HHS agencies.

     (49) Social Security Act­­Legislation passed by Congress in 1965 that established the Medicaid
   program under Title XIX and created, in the same legislation, the Medicare program under Title XVIII.

     (50) Solicitation­­Offering to pay or agreeing to accept, directly or indirectly, overtly or covertly any
   remuneration in cash or in kind to or from another for securing or soliciting a patient or patronage for or
   from a person licensed, certified, or registered or enrolled as a provider or otherwise by a state health
   care regulatory or health and human service agency.

     (51) State health care program­­Any program that has:

       (A) A state plan approved under Title XIX of the Social Security Act (Medicaid);

       (B) Any program receiving funds under Title V of the Act or from an allotment to a State under such
   title (Maternal and Child Health Services Block Grant program); or

       (C) Any program receiving funds under Title XX of the Act or from any allotment to a State under
   such title (Block Grants to States for Social Services).

     (52) Subcontractor­­Means:

       (A) an individual, agency or organization to which a disclosing entity (provider) has contracted or
   delegated some of its management functions or responsibilities of providing medical care or other
   services to its patients or recipients; or

       (B) an individual, agency or organization with which a fiscal agent has entered into a contract,
   agreement, purchase order, or lease to obtain space, equipment, or services provided under the Medicaid
   or other HHS agreement or contract.

     (53) Suspension of payments (payment hold)­­The withholding of all or any portion of payments for
   items or services furnished by a specified provider and due a provider until the matter in dispute
   between the provider and the Commissioner agent is resolved.

     (54) Title XVIII­­Title XVIII (Medicare) of the Social Security Act.

     (55) Title XIX­­Title XIX (Medicaid) of the Social Security Act.

     (56) Title XX­­Social Services Block Grant of the Social Security Act.

     (57) Waste­­Practices that spend carelessly and /or allow inefficient use of resources, items, or
   services.


   Source Note: The provisions of this §371.1601 adopted to be effective January 9, 2005, 29 TexReg
   12128


                                                 Next Page       Previous Page

                         |                            |                                             |
http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=T&app=3&p_dir=F&p_rloc=118663&p_tloc=14868&p_ploc=1&pg=2&p_tac=118663&ti=1&…   2/3
                APPENDIX

                   Tab 2

1 TEX. ADMIN. CODE § 371.1603 (eff. 1/9/2005)
1/9/2015                                                       Texas Administrative Code


   <<Back
              Historical Rule for the Texas Administrative Code
   TITLE 1                          ADMINISTRATION
   PART 15                          TEXAS HEALTH AND HUMAN SERVICES COMMISSION
   CHAPTER 371                      MEDICAID AND OTHER HEALTH AND HUMAN SERVICES FRAUD
                                    AND ABUSE PROGRAM INTEGRITY
   SUBCHAPTER G                     LEGAL ACTION RELATING TO PROVIDERS OF MEDICAL
                                    ASSISTANCE
   DIVISION 1                       FRAUD OR ABUSE AND ADMINISTRATIVE ENFORCEMENT
                                    INVOLVING MEDICAID AND OTHER HEALTH AND HUMAN
                                    SERVICES PROGRAMS
   RULE §371.1603                   Overview of Inspector General Responsibility Relating to Investigation,
                                    Referral and Administrative Enforcement in Medicaid and Other Health and
                                    Human Services Programs
   Repealed Date:                   10/14/2012

   (a) The Office of Inspector General (the Inspector General) is responsible for minimizing the
   opportunity for provider or contractor fraud, abuse, overpayments, and waste within the Medicaid and
   other HHS programs, whether the fraud or abuse was committed by providers, recipients, or other
   persons and for protecting recipients of federally funded programs from unsafe practitioners.

   (b) The Inspector General may take appropriate action as authorized in subchapters A, B, and G of this
   chapter to protect recipients and the programs when persons have committed, or are suspected of
   committing, fraud or abuse. Such actions may include administrative actions and/or sanctions and
   referral to appropriate law enforcement agencies for criminal investigation.

   (c) The Inspector General may take action against any provider or person associated with any HHS
   program or service as it relates to fraud, abuse, overpayments, waste, or program violations that rise to
   the level of fraud, abuse, or waste of those HHS programs or services, or for any of the violations for
   which the Inspector General may take action against providers or persons associated with the Medicaid
   program, as described in this subchapter.

   (d) The Inspector General may take an administrative action, sanction, impose damages or penalties, or
   abate, deny, or postpone a decision to enroll a provider or person in the Medicaid program, based upon
   an investigation or finding in the Medicaid or other HHS programs.

   (e) The Inspector General may also take an administrative action, sanction, impose damages or
   penalties, or abate, deny, or postpone a decision to enroll a provider or person in a Medicaid program or
   for a Medicaid service, based upon the investigative findings related to an investigation or finding of a
   provider or person or their principals or affiliates within a Medicaid or HHS program or receiving a
   Medicaid or HHS service.

   (f) Not all actions resulting in overpayment to a provider are necessarily fraudulent. Some circumstances
   could result in the referral of a Medicaid provider to the Attorney General's Medicaid Fraud Control
   Unit or Civil Fraud Division. Other circumstances could result in administrative action rather than
   referral for judicial action or criminal prosecution. These actions, or sanctions, could range from an
   educational notice to the provider explaining their error, to contract cancellation and/or exclusion from
http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118664&p_tloc=&p_ploc=&pg=1&p_tac=118664&ti=1&pt=15&c…   1/3
1/9/2015                                                       Texas Administrative Code

   participation in the Medicaid (Title XIX), Title XX, and Title V programs.

   (g) Investigation. When the Inspector General receives information regarding a possible program
   violation either from its review systems or through a complaint or referral filed by another agency or
   person, the Inspector General initiates an investigation. After completing its preliminary investigation,
   the Inspector General may, at its discretion, initiate settlement discussions with the person who is the
   subject of the investigation. If the matter cannot reasonably be settled or if the Inspector General
   determines that further investigation is required before the propriety of settlement or other enforcement
   can be evaluated, the Inspector General may conduct a full investigation of the case.

   (h) An Inspector General case remains open until the investigation is complete, the case is reasonably
   settled, the Inspector General makes an administrative determination that closes the case for lack of
   evidence or appropriate administrative enforcement, and/or legal action is completed. At any time
   during the investigative or enforcement process, the Inspector General maintains the authority to settle
   administrative cases, impose payment holds, or request the Office of the Attorney General to obtain an
   injunction to prevent a person from disposing of an asset identified by the OIG as potentially subject to
   recovery by the OIG due to the person's fraud or abuse.

   (i) Referral for Legal Action. The Inspector General refers all cases of suspected Medicaid fraud or
   patient abuse or neglect to the Medicaid Fraud Control Unit (MFCU) or the Civil Fraud Division (CFD)
   at the Office of the Attorney General (OAG) for investigation regarding the need for criminal or civil
   prosecution. If the MFCU fails to act on a matter within 30 days of receiving a referred case from the
   Inspector General or returns a case to the Inspector General without initiating prosecution, the Inspector
   General may refer the matter to an appropriate prosecuting authority or a collection agency. Nothing in
   these rules is intended to prevent concurrent administrative, civil, and/or criminal investigation and
   action regarding suspected fraud or patient abuse or neglect. Subject to express statutory limitations, the
   Inspector General may proceed with recoupment and/or administrative enforcement concurrently with
   judicial prosecution of the same matter.

   (j) Administrative Enforcement. Based upon the nature and severity of the program violation, the
   provider's previous history of violations, evidence of the provider's knowledge and intent, and other
   relevant factors, the Inspector General may select enforcement measures from the three categories set
   forth below and in more detail at Divisions 3 ­ 6 of this subchapter.

     (1) Administrative Actions­­The Inspector General may impose an administrative action to provide
   safeguards for future compliance or refer a matter for additional review or enforcement; e.g., education,
   referral to licensing board, referral for judicial action. The imposition of administrative actions does not
   give rise to due process notice or hearing requirements.

     (2) Sanctions­­Sanctions may directly impact a person's ability to keep or receive payments and/or the
   person's participation in the Medicaid program; e.g., exclusion from program participation, recoupment
   of overpayments, or payment hold. Imposition of sanctions triggers due process notice and hearing
   requirements.

     (3) Damages and Penalties (formerly "Civil Monetary Penalties")­­The imposition of damages or
   penalties for program violations (e.g., false claims, specified managed care acts or omissions) triggers
   due process notice and hearing requirements.


   Source Note: The provisions of this §371.1603 adopted to be effective January 9, 2005, 29 TexReg
   12128
http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118664&p_tloc=&p_ploc=&pg=1&p_tac=118664&ti=1&pt=15&c…   2/3
                APPENDIX

                   Tab 3

1 TEX. ADMIN. CODE § 371.1613 (eff. 1/9/2005)
1/9/2015                                                       Texas Administrative Code


   <<Back
              Historical Rule for the Texas Administrative Code
   TITLE 1                          ADMINISTRATION
   PART 15                          TEXAS HEALTH AND HUMAN SERVICES COMMISSION
   CHAPTER 371                      MEDICAID AND OTHER HEALTH AND HUMAN SERVICES FRAUD
                                    AND ABUSE PROGRAM INTEGRITY
   SUBCHAPTER G                     LEGAL ACTION RELATING TO PROVIDERS OF MEDICAL
                                    ASSISTANCE
   DIVISION 2                       MEDICAID PROGRAM AUTHORITY AND VIOLATIONS
   RULE §371.1613                   Program Authority
   Repealed Date:                   10/14/2012


   When established by prima facie evidence, all Medicaid and other HHS program violations (defined at
   §371.1617 of this subchapter) are subject to administrative enforcement and/or criminal or other
   appropriate judicial action. The method of enforcement reflects the evidence of the intent of the non­
   compliant provider or person. Unintentional program violations are subject to administrative actions and
   sanctions. Violations the provider or person knew or should have known were false and involved
   program or patient abuse or fraud are also subject to administrative monetary penalties, as well as
   criminal or other judicial prosecution. In accordance with 42 Code of Federal Regulations (CFR)
   §455.13(a), the Inspector General has established methods and criteria for identifying suspected fraud
   cases. Criteria to establish suspected fraud is based upon evidence of intentional deception or
   misrepresentation or upon a program violation or violation of other governing statutory law, including
   without limitation neglect, that appears to have been committed intentionally or with knowing and
   willful disregard for program rules.


   Source Note: The provisions of this §371.1613 adopted to be effective January 9, 2005, 29 TexReg
   12128


                                                  Next Page       Previous Page

                         |                            |                                              |




http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118669&p_tloc=&p_ploc=&pg=1&p_tac=118669&ti=1&pt=15&c…   1/1
                APPENDIX

                   Tab 4

1 TEX. ADMIN. CODE § 371.1643 (eff. 1/9/2005)
1/9/2015                                                            : Texas Register




                                                    Texas Register
   TITLE 1     ADMINISTRATION
   PART 15     TEXAS HEALTH AND HUMAN SERVICES COMMISSION
   CHAPTER 371 MEDICAID AND OTHER HEALTH AND HUMAN SERVICES FRAUD AND
               ABUSE PROGRAM INTEGRITY
   SUBCHAPTER LEGAL ACTION RELATING TO PROVIDERS OF MEDICAL ASSISTANCE
   G
   DIVISION 4  ADMINISTRATIVE SANCTIONS
   RULE        Use of Sanctions
   §371.1643
   ISSUE       12/31/2004
   ACTION      Final/Adopted
   Preamble                                                  No Rule Available

   (a)In response to program violations in the Medicaid program, including but not limited to any
   substantiated reason specified in §371.1617 of this subchapter, the Inspector General may impose
   against a provider or person, as defined in §371.1601 of this subchapter, any one or combination of
   sanctions specified in subsection (c) of this section.

   (b)The imposition of an administrative action is not prerequisite to the use of a sanction, although
   sanctions may be imposed in conjunction with other administrative enforcement measures.

   (c)Administrative sanctions include:

     (1)exclusion from participation in the Titles V, XIX (Medicaid), and XX programs for a specified
   period of time, permanently, or indefinitely; (In this subchapter, exclusion from Medicaid automatically
   precipitates concurrent exclusion from Titles V, and XX.)

     (2)suspension of payments (payment hold) to a provider in Titles V, XIX (Medicaid), XX, and CHIP
   programs;

     (3)recoupment of overpayments in Titles V, XIX (Medicaid), and XX programs;

     (4)recoupment of overpayments projected from a sampling process in Titles V, XIX (Medicaid), and
   XX programs;

     (5)restricted reimbursement for a specified period of time or indefinitely in Titles V, XIX (Medicaid),
   and XX programs­­Specific services will not be reimbursed to an individual provider during the time the
   provider is on restricted reimbursement; however, other services, as determined by the Inspector
   General, will be reimbursed;

     (6)cancellation of provider contract or provider agreement in Titles V, XIX (Medicaid), and XX,
   programs; and

     (7)debarment or suspension under the authority of the Code of Federal Regulations.

http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=1&p_dir=&p_rloc=124206&p_tloc=&p_ploc=&pg=1&p_reg=124206&ti=1&pt=15…   1/6
1/9/2015                                                            : Texas Register

   (d)Providers or Persons Subject to Sanctions.

     (1)Providers or persons furnishing services or items directly or indirectly for the Medicaid program are
   subject to sanctions for violations of the program;

     (2)Any affiliates of a provider or person as specified in subsection (d) of this section.

     (3)Providers or persons in violation of any of the violations set forth in Subchapter G of this chapter;
   and

     (4)Providers or persons committing other program violations for which the Inspector General
   determines that sanctions are appropriate.

   (e)Affiliate Relationship.

     (1)A provider or person, as defined in §371.1601 of this subchapter, is deemed to have an affiliate
   relationship with another provider or person, if they:

       (A)have a direct or indirect ownership interest (or any combination thereof) of 5% or more in the
   entity;

       (B)are the owner of a whole or part interest in any mortgage, deed of trust, note or other obligation
   secured (in whole or in part) by the entity or any of the property assets, thereof, in which whole or part
   interest is equal to or exceeds 5% of the total property and assets of the entity;

       (C)are an officer or director, if organized as a corporation;

       (D)are a partner, if organized as a partnership;

       (E)are an agent or consultant;

       (F)are a managing employee, that is, a person (including a general manager, business manager,
   administrator or director) who exercises operational or managerial control over a person or part thereof,
   or directly or indirectly conducts the day­to­day operations of the entity or part thereof;

       (G)are providers or person(s) associated with one another so that any one of them, directly or
   indirectly, controls or has the power to control another in whole or in part;

       (H)share any of the following: e.g. tax identification numbers, social security numbers, bank
   accounts, telephone number, business location. (This is not an all inclusive list); or

       (I)was formerly described in subsection (d)(1) of this section, but is no longer described, because of a
   transfer of ownership or control interest to an immediate family member or a member of the person's
   household as defined in subsection (d)(3) of this section, in anticipation of, or following a conviction,
   assessment of damages or penalties under §371.1721 et seq. of this subchapter, or imposition of a
   sanction.

     (2)The Inspector General may sanction an affiliate of a provider or person, as defined in §371.1601 of
   this subchapter, if a provider or person with an affiliate relationship:

       (A)has been convicted of a criminal offense related to the Medicaid or Medicare program or as
   described in §§1128(a) and 1128(b)(1), (2), or (3) of the Social Security Act, or of an offense related to

http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=1&p_dir=&p_rloc=124206&p_tloc=&p_ploc=&pg=1&p_reg=124206&ti=1&pt=15…   2/6
1/9/2015                                                            : Texas Register

   another HHS program;

       (B)has had damages and penalties or assessments imposed under §371.1721 et seq. of this subchapter
   or §1128A of the Social Security Act; or

       (C)has been excluded from participation in Medicaid, Medicare, or any state's health care program.

     (3)For purposes of this section, the following terms are defined as:

       (A)Agent means any person who has express or implied authority to obligate or act on behalf of a
   provider or person, as defined in §371.1601 of this subchapter.

       (B)Immediate family member means, a person's husband, wife, or spouse; natural or adoptive parent;
   child or sibling; stepparent, stepchild, stepbrother or stepsister; father­, mother­, daughter­, son­,
   brother­ or sister­in­law; grandparent or grandchild; or spouse of a grandparent or grandchild.

       (C)Indirect ownership interest includes an ownership interest through any other entities that
   ultimately have an ownership interest in the provider or person in issue. (For example, an individual has
   a 10 percent ownership interest in the entity at issue if they have a 20 percent ownership interest in a
   corporation that wholly owns a subsidiary that is a 50 percent owner of the entity in issue.)

       (D)Member of household means, with respect to a person, with whom they are sharing a common
   abode as part of a single­family unit, including domestic employees, partners, and others who live
   together as a family unit.

       (E)Ownership interest means an interest in the capital, the stock or the profits of the entity or any
   mortgage, deed, trust or note, or other obligation secured in whole or in part by the property or assets of
   the person.

   (f)Failure to Grant Immediate Access.

     (1)The Inspector General may sanction any provider or person, including managed care organizations
   and their subcontractors, as defined in §371.1601 of this subchapter, that:

       (A)fails to grant immediate access upon reasonable request to:

         (i)the Inspector General;

         (ii)the Attorney General's Medicaid Fraud Control Unit or Civil Fraud Division;

         (iii)any state or federal agency authorized to conduct compliance, regulatory, or program integrity
   functions on the provider, person, or the services rendered by the provider or person; or

         (iv)any agent or consultant of any agency or division within an agency formerly described in
   subparagraph (A) of this paragraph;

       (B)fails to allow the Inspector General or any other federal or state agency, division, agent or
   consultant as described in subparagraph (A) of this paragraph to conduct any duties that are necessary to
   the performance of their statutory functions;

       (C)fails to provide to the Inspector General or any other federal or state agency, division, agent or
   consultant as described in subparagraph (A) of this paragraph, upon request and as requested, for the

http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=1&p_dir=&p_rloc=124206&p_tloc=&p_ploc=&pg=1&p_reg=124206&ti=1&pt=15…   3/6
1/9/2015                                                            : Texas Register

   purpose of reviewing, examining, and securing custody of records, access to, disclosure of, and custody
   of copies or originals of any records, documents, or other requested items, as determined necessary by
   the Inspector General or those specified in subparagraph (A) of this paragraph to perform statutory
   functions, any records the provider or person is required to maintain; any records necessary to verify
   items or services furnished and delivered under Medicaid, any other HHS program, or any state health
   care program to determine whether payment for those items or services is due or was properly made.
   This includes, without limitation: clinical medical patient records, other records pertaining to the patient,
   any other records of services provided to Medicaid or other HHS program recipients and payments
   made for those services, documents related to diagnosis, treatment, service, lab results, charting, billing
   records, invoices, documentation of delivery of items, equipment, or supplies, and radiographs and all
   requirements of §371.1617(a)(2) of this subchapter. It also includes the business and accounting records
   with backup support documentation, statistical documentation, computer records and data, patient sign
   in sheets, and schedules. Accessible information must include information that is necessary for the
   agencies specified in this paragraph to perform statutory functions. It includes those elements described
   in §371.1601 of this subchapter (definition of "failure to provide immediate access").

     (2) For purposes of paragraph (1)(A) and (1)(B) of this subsection, the term:

       (A)Failure to grant immediate access means the failure to grant access at the time of a reasonable
   request.

       (B)Reasonable request means a request made by a properly identified agent of the Inspector General
   or another state or federal agency identified in paragraph (1)(A) of this subsection, during hours that the
   business or premises is open for business.

     (3)For purposes of paragraph (1)(C) of this subsection, the term Failure to grant immediate access
   means:

       (A)The failure to produce or make available records within 24 hours of the request for production, for
   the purpose of reviewing, examining, and securing custody of records upon reasonable request, as
   determined by the requestor, Inspector General and all other state and federal agencies, except where the
   Inspector General or another state or federal agency identified in paragraph (1)(A) of this subsection
   reasonably believes that requested documents are about to be altered or destroyed or that the request
   may be completed at the time of the request and/or in less than 24 hours;

       (B)The failure to provide access to requested records at the time of the request, for the purpose of
   reviewing, examining, and securing custody of records upon reasonable request, when the Inspector
   General or another state or federal agency identified in paragraph (1)(A) of this subsection, has reason to
   believe that requested documents are about to be altered or destroyed or the request, in the opinion of
   the Inspector General or the other requestor, determined that the request could be met at that time and/or
   in less than 24 hours.

       (C)Reasonable request means a request for records or documents made by a properly identified agent
   of the Inspector General or another state or federal agency identified in paragraph (1)(A) of this
   subsection, during hours that the business or premises is open for business.

     (4)In most instances, providers or persons required to produce records or documents will be required to
   complete a Records Affidavit, Business Records Affidavit, Evidence Receipt, and/or Patient Record
   Receipt, at the direction of the requestor, and to attach these documents to the records provided.

     (5)As directed by the requestor, and in accordance with the provisions of subsection (e) of this section,

http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=1&p_dir=&p_rloc=124206&p_tloc=&p_ploc=&pg=1&p_reg=124206&ti=1&pt=15…   4/6
1/9/2015                                                            : Texas Register

   the provider or person will relinquish custody of the records and documents and the requestor will take
   custody of the records and remove them from the premises. If the requestor should allow longer than "at
   the time of the request" to produce the records, the provider or person will be required to produce all
   records completed, at the time of completion or at the end of each day of production, as directed by the
   requestor, to the requestor who will take custody of the records. Failure to comply with the provisions of
   this part will result in a finding of Failure to grant immediate access.

     (6)Nothing in this section shall in any way limit access otherwise authorized under State or Federal
   law.

     (7)Exclusion.

       (A)A program exclusion imposed against a provider or person under this section may be for a period
   equal to the sum of:

         (i)The length of the period during which the immediate access was not granted, and

         (ii)An additional period of up to one year.

       (B)The exclusion of a provider or person may be for a longer period than the period in which
   immediate access was not granted based on consideration of the following factors:

         (i)The impact of the failure to grant the requested immediate access on Medicaid or other HHS
   program;

         (ii)The circumstances under which such access was refused; and

         (iii)Whether the provider or person has a documented history of criminal, civil, or administrative
   wrongdoing. The lack of any prior record is to be considered neutral.

       (C)For purposes of this section, the length of the period in which immediate access was not granted
   will be measured from the time the request is made.

       (D)The exclusion will be effective as of the date immediate access was not granted.

     (8)The Inspector General will work with the provider or person, within the limitations necessitated by
   the circumstances of the investigative case, to provide the provider or person, within a reasonable time,
   as determined by the Inspector General, and at the provider or person's expense, with copies of the
   records necessary for the provider to continue their immediate business. Nothing herein shall be
   interpreted to impede the Inspector General's or other requestor's ability to obtain all records and
   documents as required and to which the requestor is entitled under this section.

   This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a
   valid exercise of the agency's legal authority.

   Filed with the Office of the Secretary of State on December 20, 2004

   TRD­200407413

   Steve Aragón

   Chief Counsel

http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=1&p_dir=&p_rloc=124206&p_tloc=&p_ploc=&pg=1&p_reg=124206&ti=1&pt=15…   5/6
1/9/2015                                                            : Texas Register

   Texas Health and Human Services Commission

   Effective date: January 9, 2005

   Proposal publication date: June 18, 2004

   For further information, please call: (512) 424­6900




                                                 Next Page       Previous Page

                                            Re­Query Register              Back to List of Records  


                         |                            |                                                |




http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=1&p_dir=&p_rloc=124206&p_tloc=&p_ploc=&pg=1&p_reg=124206&ti=1&pt=15…   6/6
                APPENDIX

                   Tab 5

1 TEX. ADMIN. CODE § 371.1647 (eff. 1/9/2005)
1/9/2015                                                            : Texas Register




                                                    Texas Register
   TITLE 1     ADMINISTRATION
   PART 15     TEXAS HEALTH AND HUMAN SERVICES COMMISSION
   CHAPTER 371 MEDICAID AND OTHER HEALTH AND HUMAN SERVICES FRAUD AND
               ABUSE PROGRAM INTEGRITY
   SUBCHAPTER LEGAL ACTION RELATING TO PROVIDERS OF MEDICAL ASSISTANCE
   G
   DIVISION 4  ADMINISTRATIVE SANCTIONS
   RULE        Notice of Sanction
   §371.1647
   ISSUE       12/31/2004
   ACTION      Final/Adopted
   Preamble                                                  No Rule Available

   (a)The Inspector General provides written notice of a potential sanction(s) by certified mail with return
   receipt or by facsimile transmission with confirmation page. A recoupment requires both an initial
   written notice of potential sanction and a subsequent written notice of final sanction; therefore, any
   additional sanctions of any type in the same notice letter with a recoupment will require both notice
   letters. Additional provisions regarding notice of an exclusion are provided in §371.1649 of this
   subchapter. If there is no specific requirement in Subchapter G for a written notice of a potential
   sanction for an individual specific situation, the only sanction notice letter required is the notice of final
   sanction.

   (b)Potential sanction. The written notice of potential sanction includes:

     (1)a description of the potential sanction;

     (2)the basis of the potential sanction;

     (3)the effect of the potential sanction;

     (4)its duration (duration could be indefinite or until a certain event occurred), if appropriate; and

     (5)if the sanction is an exclusion, the notice must contain a description of the method the provider uses
   to request reinstatement, unless the exclusion is permanent.

   (c)In the case of a recoupment, a statement of the provider's or person's right to request a formal appeal
   hearing of the potential sanction is not provided in the initial notice letter, since this is not a final
   sanction. A statement of the provider's or person's right to request a formal appeal hearing of the final
   sanction will be subsequently provided with the final written notice of the Inspector General's final
   overpayment determination.

   (d)Final sanction. The written notice of final sanction includes:

     (1)a description of the final sanction;

http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=1&p_dir=&p_rloc=124216&p_tloc=&p_ploc=&pg=1&p_reg=124216&ti=1&pt=15…   1/3
1/9/2015                                                            : Texas Register

     (2)the basis of the final sanction;

     (3)the effect of the final sanction;

     (4)its duration (duration could be indefinite or until a certain event occurred), if appropriate;

     (5)a statement of the provider's or person's right to request a formal appeal hearing of the sanction; and

     (6)if the sanction is an exclusion, the notice must contain a description of the method the provider or
   person uses to request reinstatement, unless the exclusion is permanent.

   (e)The sanctions will take effect in the following manner:

     (1)Recoupment­­The provider or person will receive a notice of a potential sanction to impose
   recoupment. The provider or person may request an informal review, to informally discuss the issues
   and allow the provider or person an opportunity to provide information they deem appropriate.
   Subsequently, the Inspector General will make a final determination regarding the amount to be
   recouped. Upon that determination, the Inspector General will send final determination and notice of
   recoupment to the provider or person.

     (2)Payment hold­­A payment hold on payments of future claims submitted for reimbursement will be
   imposed, without prior notice, as specified in §371.1703(b) of this subchapter. The provider will be
   notified of the payment hold not later than the fifth (5th) working day after the date the hold is imposed.
   The payment hold will remain in effect until all issues regarding the provider's billing practices are
   finally resolved, including all litigation and judicial processes.

     (3)Restricted reimbursement­­The provider will receive final notice of intent to impose restricted
   reimbursement unless the provider meets one of the exception criteria enumerated in §371.1649 and
   §371.1651 of this subchapter. The provider may request an informal review and/or an administrative
   appeal hearing as described in paragraph (1) of this subsection.

     (4)Exclusion­­The provider or person will receive a notice of potential imposition of exclusion unless
   the provider meets one of the exception criteria enumerated in §371.1649 and §371.1651 of this
   subchapter. The provider or person may request an informal review, to informally discuss the issues and
   allow the provider or person an opportunity to provide information they deem appropriate. This process
   will occur before the Inspector General submits its final notice of exclusion to the provider or person. At
   that time, the provider or person may request an administrative appeal hearing as described in
   §371.1669 of this title.

     (5)Cancellation of contract or provider agreement­­The provider or person will receive a notice of
   potential cancellation of contract or provider agreement unless the provider meets one of the exception
   criteria enumerated in §371.1649 and §371.1651 of this subchapter. The provider may request an
   informal review as described in paragraph (1) of this subsection. This process will occur before the
   Inspector General submits its final notice of cancellation of contract or provider agreement to the
   provider or person. If a provider or person is excluded who also has a contract or provider agreement,
   prior notice of the cancellation of contract or provider agreement is not a requirement, since the scope
   and effect of the exclusion, as specified in §371.1673 of this subchapter, does not allow that person to
   participate in Titles XIX, V, and XX programs. The contract or provider agreement in that instance
   would be cancelled effective the effective date of the exclusion.

   This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a
   valid exercise of the agency's legal authority.
http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=1&p_dir=&p_rloc=124216&p_tloc=&p_ploc=&pg=1&p_reg=124216&ti=1&pt=15…   2/3
1/9/2015                                                            : Texas Register

   Filed with the Office of the Secretary of State on December 20, 2004

   TRD­200407413

   Steve Aragón

   Chief Counsel

   Texas Health and Human Services Commission

   Effective date: January 9, 2005

   Proposal publication date: June 18, 2004

   For further information, please call: (512) 424­6900




                                                 Next Page       Previous Page

                                            Re­Query Register              Back to List of Records  


                         |                            |                                                |




http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=1&p_dir=&p_rloc=124216&p_tloc=&p_ploc=&pg=1&p_reg=124216&ti=1&pt=15…   3/3
                APPENDIX

                   Tab 6

1 TEX. ADMIN. CODE § 371.1667 (eff. 1/9/2005)
1/9/2015                                                       Texas Administrative Code


   <<Back
              Historical Rule for the Texas Administrative Code
   TITLE 1                          ADMINISTRATION
   PART 15                          TEXAS HEALTH AND HUMAN SERVICES COMMISSION
   CHAPTER 371                      MEDICAID AND OTHER HEALTH AND HUMAN SERVICES FRAUD
                                    AND ABUSE PROGRAM INTEGRITY
   SUBCHAPTER G                     LEGAL ACTION RELATING TO PROVIDERS OF MEDICAL
                                    ASSISTANCE
   DIVISION 4                       ADMINISTRATIVE SANCTIONS
   RULE §371.1667                   Due Process for Administrative Sanctions
   Repealed Date:                   10/14/2012

   (a) The Inspector General affords, to any provider or person against whom it imposes sanctions, all
   administrative and judicial due process remedies applicable to administrative sanctions.

   (b) The person is also offered, in the sanction notice letter, an opportunity to request an informal review
   of the imposition of sanction. The provider or person is given an opportunity to submit documentary
   evidence and written argument concerning whether the sanction is warranted and other related issues. A
   submission of documentary evidence or written argument does not guarantee it will be sufficient to rise
   to the level of acceptable evidence or argument. If, upon review by the Inspector General, the
   documentary evidence or written argument remains unacceptable, the Inspector General may proceed
   with imposition of administration sanctions. The provider or person may choose to request an informal
   review, a formal appeal hearing, or both. If both an informal review and formal appeal hearing are
   chosen, the formal appeal hearing and all pertinent discovery, prehearing conferences, and all other
   issues and activities regarding the formal appeal hearing will be abated until all informal review
   discussions have ended without settlement or resolution of the issues. In certain situations, the informal
   review will not be offered.

   (c) When the exclusion is based on the existence of a criminal conviction, a civil fraud finding, a civil
   judgment imposing liability by federal, state, or local court, a determination by another government
   agency or board, any other prior determination, or provisions within a settlement agreement, the basis
   for the underlying determination is not reviewable and the individual or entity may not collaterally
   attack the underlying determination, either on substantive or procedural grounds, in an administrative
   appeal.


   Source Note: The provisions of this §371.1667 adopted to be effective January 9, 2005, 29 TexReg
   12128


                                                  Next Page       Previous Page

                         |                            |                                              |




http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118696&p_tloc=&p_ploc=&pg=1&p_tac=118696&ti=1&pt=15&c…   1/1
                APPENDIX

                   Tab 7

1 TEX. ADMIN. CODE § 371.1669 (eff. 1/9/2005)
1/9/2015                                                       Texas Administrative Code


   <<Back
              Historical Rule for the Texas Administrative Code
   TITLE 1                          ADMINISTRATION
   PART 15                          TEXAS HEALTH AND HUMAN SERVICES COMMISSION
   CHAPTER 371                      MEDICAID AND OTHER HEALTH AND HUMAN SERVICES FRAUD
                                    AND ABUSE PROGRAM INTEGRITY
   SUBCHAPTER G                     LEGAL ACTION RELATING TO PROVIDERS OF MEDICAL
                                    ASSISTANCE
   DIVISION 4                       ADMINISTRATIVE SANCTIONS
   RULE §371.1669                   Notice of Appeal
   Repealed Date:                   10/14/2012

   (a) To appeal a final sanction imposed by the Inspector General, a provider or person shall file a written
   request for appeal with the Inspector General within twenty (20) calendar days of the date of the
   person's receipt of the notice of final sanction, unless specified otherwise in other sections of this
   subchapter. The Inspector General will then forward the notice of appeal to the Commission's Office of
   General Counsel for docketing. If an informal review has also been requested, the appeal will be abated
   until all efforts to resolve or settle the sanction have been unsuccessful. At the conclusion of the
   informal review process, the Inspector General will then forward the notice of appeal to the
   Commission's Office of General Counsel for docketing.

   (b) The letter requesting an appeal hearing or informal review will contain a statement as to the specific
   issues, findings, and/or legal authority in the notice letter with which the sanctioned provider or person
   disagrees, and the basis for their contention that the specific issues or findings and conclusions are
   incorrect. The request for a hearing must be made in writing to the Manager of Sanctions. The request
   must be signed by the provider or person sanctioned or by their attorney and sent by certified mail to
   arrive in Sanctions by the filing deadline. No other person or party may appeal for or on behalf of the
   sanctioned provider or person.


   Source Note: The provisions of this §371.1669 adopted to be effective January 9, 2005, 29 TexReg
   12128


                                                  Next Page       Previous Page

                         |                            |                                              |




http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118697&p_tloc=&p_ploc=&pg=1&p_tac=118697&ti=1&pt=15&c…   1/1
