Texas IG Approves Free Fraud Detection Tool

Stuart Bowen, the current Inspector General in the Tx HHSC, has approved the use of a free downloadable statistical software tool from the federal OIG, RAT-STAT, to be used in the state’s OIG fraud detection scheme. Contrast this with the debacle of the 21CT software which costs upwards of $20 million, gave hundreds of false positives emanating from bad claims extrapolations and specious associations, was championed and promoted by Jack Stick, the former Deputy IG, under FBI and DOJ investigation, for over a year now and praised and applauded by the majority party in the Texas legislature in various state hearings.

RAT-STAT is a software toolkit built in the late 1970s by federal OIG developers, used to randomly select claims for auditing and further statistical analysis, in combating fraud. The idea behind RAT-STAT is simple and is based on basic statistical sampling techniques. RAT-STAT permits the calculation of a suitable audit sample size and the sampling from a population of items based on pseudo-random number generation. It can then perform a statistical analysis on those samples. It was written using the old Visual Basic programming language and is based on 1970s, albeit valid statistical research. Therein lies two problems, (i) the updating of statistical and machine learning algorithms and research since and (ii) the need for human intervention in performing the sampling, stratification, and interpretation of the statistical analysis afterwards. Probe sampling needs to be done on the universe of claims from a provider to initially feed appropriate parameters to the software in order to have a chance at generating a valid sample size for the purpose of a statistically accurate targeted audit.

Nonetheless, RAT-STAT is a free downloadable package that is available to the general public. Providers have the opportunity to self-audit their claims using the software, as a due-diligence stage in their compliance program. SynerImages is available to help you in utilizing this tool for your compliance program. We have improved on the RAT-STAT package and can give other alternatives, (i.e., R-based tools, etc.) using more modern tools and research.

Texas’ 3rd Court of Appeals Overturns Therapy Injunction

This morning, in a surprise move, the Texas 3rd Court of Appeals (http://www.txcourts.gov/3rdcoa/about-the-court.aspx) overturned the injunction against the Tx HHSC. This court is an all-republican one and overturning the injunction appears to be an attempt to unify their political approach in all things Texas. Because of the nature of the appeals process in Texas and because of SCOTUS’s decision on Medicaid-reimbursement related federal cases, all appeals to the Texas Supreme Court and federal courts may be minimized. The scheduled injunction trial for April 25, has been canceled and the attempt to enjoin Superior in the injunction will probably not go forward as well.

The CMS, however, can be a final arbiter in this case because of their jurisdiction as pertains to all states’ Medicaid programs. They have shown a large interest in this case and the SCOTUS decision also exposed certain compromising attitudes in cases of inadequate states’ Medicaid reimbursement rates. This is a major setback for all therapy providers in Texas and indeed, in the nation. It appears to be political in nature and points to a concerted effort by some to minimize, eliminate or marginalize services for Medicaid children in Texas.

Now is the time to think political. Compromising over this issue has been fruitless as this juggernaut attempt by some in the Texas legislature to dismiss Medicaid in Texas has reached a pinnacle in its insidiousness against Medicaid children and recipients. The general election of 2016 will prove to be pivotal in changing the landscape of the Texas legislation. Medicaid providers must take part in this attempt if Medicaid children are to have any chance of survival. The Texas 3rd Court of Appeals has only two seats that are on the ballot this election year and both are republicans running unopposed. By contrast, both Texas Houses have numerous seats to be decided. When assessing political candidates, ask them what their stances are on Medicaid therapy. Obtain pledges from them (when possible) to help defend Medicaid therapy. When you notice that those who have opposed Medicaid therapy are running unopposed, encourage opposition. Lastly, educate the public about what these cuts will mean for them – even if they are not Medicaid recipients.

Now is also the time to re-think your strategies for your therapy business – staffing, insurance contracting, efficiencies, and your client portfolios. We will have more on this and any appeal attempts. The main point is this – the Tx HHSC therapy Medicaid proposal rates of October 2016 will govern all MCO discount rates and all of your business motives – even if your primary portfolio is not Medicaid because all insurance discount rates will be based on the new prevailing Medicaid rates (PMR).

On the issue of what rate proposal Tx HHSC would be implementing, if final appeals (if any) are defeated or CMS cannot proceed with an order to the Tx HHSC to cease – it is unclear. The Tx HHSC could very easily decide to propose and implement their lower-rated 10/1/2016 proposal, as opposed to their original 9/1/2016 proposal. They may also try and release a brand new proposal. If the Tx HHSC decides to implement the 10/1/2016 proposal or a new one, they would need to have a public hearing – requiring another 2 months or so for notification of and conducting a public hearing. At this point and barring any immediate movement from CMS or the plaintiffs filing an appeal with the State Supreme Court, the Tx HHSC can essentially do anything they want with the rates. They may be feeling a new empowerment as a result of this political assault on Texas children. We will keep you posted on their latest movements.

Finally, there has been a large amount of confusion as to what the Superior deeming letters mean for those that have received them. What about the question of those currently at lower contracted discount rates, (i.e. those at 50%, 60%, etc of the PMR)? Will they get raises to 70% of the PMR for assistant therapists’ coding? Definitely not. What about those getting cut to 75% (70% for HCSSAs)? Will those be for non-assistant therapy billings only? Will the 70% for assistant therapy coding be discounted off their current contracted rates or off the PMR?

As a result of discussions and written communication with some of their regional reps, it seems that Superior is trying to make the following universal policy in their networks:

  • the “preferred” therapy provider will be reduced to 75% (70% HCSSAs) of the PMR for non-assistant therapists’ coding,
  • the “non-preferred” therapy provider will stay under 75% (70% HCSSAs) of the PMR for non-assistant therapists’ coding,
  • all therapy providers (both “preferred” and “non-preferred”) will be reimbursed at the lesser of 70% or the current contracted discounted rate, of PMR for assistant therapists’ coding only.

“Preferred” therapy provider here means therapy providers that are in underserved or “therapy provider-unsaturated” regions. However, all this may be moot because Superior (and other Medicaid MCOs) may let Tx HHSC dictate the final contracted reimbursement rate based on the implementation of their lower-rated proposal after the injunction attempt. The 70% discounted rate for assistant therapists’ codings will probably stand no matter what proposal is implemented.


The Tx HHSC commissioner, Chris Traylor, has announced his resignation effective May 31, 2016. He would have been at the head of the agency for only 11 months and come September when a new commissioner is appointed, will mark the fourth commissioner the Tx HHSC has had in the past 4 years. See the Dallas Morning News article today on his resignation for more detail, including his possible successor at http://trailblazersblog.dallasnews.com/2016/04/chris-traylor-is-leaving-as-texas-social-services-czar-next-month.html/. His resignation becomes especially curious since the decision from the appeals courts against the injunction may cause an anticipated showdown with CMS and others. The TX HHSC has suffered from continual controversies through the reigns of Tom Suehs, Kyle Janek and now, Chris Traylor.

Supporting the Injunction … Fighting Back and Protecting Texas Children and Therapy Providers

This week marks the beginning of the most important month for Medicaid therapy in Texas and possibly in the nation. At stake is the very fiber of the therapy industry in Texas Medicaid and hence for most other payor options. The amended injunction that now includes Superior Healthplans as a co-defendant will be ruled on by the injunction presiding state district judge, Tim Sulak tomorrow. On April 25, the injunction will be finally ruled on as well.

At this point, in a united front, therapists and therapy businesses in Texas should consider the uniform support of this injunction. There is a website dedicated to the support of Texas Medicaid children receiving therapy and the injunction. Visit the website HTTP://PROTECTINGTEXASKIDS.COM to support this cause.

Texas legislators, including state Sen. Jane Nelson, R-Flower Mound and state Sen. Charles Schwertner, R-Georgetown who have supported the Tx HHSC and managed care MCOs to reduce the reimbursement rates for Medicaid therapy services, have justified these actions as being a stop-gap effort to curb state overspending on an increased number of therapists in the state.  Additionally, they remain defiant in their claim that therapists in Texas are overpaid – this despite the debunking of the Texas A&M study that the school itself has distanced itself from and is now in the midst of proving the opposite in another study.

Consideration of the effect of the markedly increased Medicaid market in the state which would most assuredly have caused the increase in therapists was not investigated as a cause-and-effect by the Legislature nor in any of its healthcare subcommittees. Moreover, the loss of therapy services because of a reduction of therapists through the implementation of these rate reductions, either through Tx HHSC’s base rate reduction proposals or the discounted rates being offered by Texas MCOs for Medicaid therapy services, will mean only one thing – the future deterioration of the health of Texas Medicaid children and hence the long-term debt in spending to relieve that highly probable health epidemic. The so-called $135 million gap produced by the sustainment of the current Medicaid therapy rates would easily be paid by a small fraction of the Texas Rainy Day fund.

The underlying political question emanating from the microcosm of this reimbursement struggle appears to be the will of the legislators to continue to maintain and support the Medicaid therapy program in Texas, (i.e., reimbursing for any therapy services for Medicaid recipients).

As Predicted … Medicaid Therapy Reimbursement War Shifts to Medicaid MCO Landscape

Last year (2015), we had predicted that because the TxHHSC was finalizing the shift from Medicaid Fee-for-Service to near 100% Managed Care Medicaid per the Legislature’s mandates, the reimbursement wars would likewise shift from TxHHSC rate reduction proposals to MCO-contracted discount rate policies. TxHHSC is in the midst of a landmark injunction against its latest rate reduction proposal with a more-than-likely final trial period set for April 25-29, 2016. This trial, so far, has not gone well for TxHHSC. Repeated appeals from TxHHSC have been vehemently denied by the presiding judge. In a reimbursement strategy that appears to endeavor to circumvent legal requirements, the Texas contracted MCOs, including now, the largest Medicaid MCO, Superior, have proposed to dramatically reduce the effective reimbursement rates for many Texas Medicaid therapy operations to come in line with the range of 75% of the prevailing Medicaid rate (PMR) for office settings (OPT/CORF/independent clinics) and 70% of PMR for therapy home health.

Effectively, if one has an operating MCO contract that reimburses above 75% (for office settings) or above 70% (for therapy home health) of the PMR respectively, discount rate reductions are being proposed to put current rates on par with the 75% (70%) of PMR range. For those that have contracts reimbursing below those figures, no change upwards is forthcoming. It appears, therefore that Superior (and other Texas Medicaid MCOs) is targeting to contract Texas therapy providers in the range of 49% to 70% of PMR for therapy home health and 50% to 75% of the PMR for therapy office settings (ORF/CORF/independent clinics) since the smallest contract discount rates we have observed have been 50% of PMR. It remains to be seen if all contracted Texas Medicaid MCOs will follow suit as many have had a policy of larger reimbursements, but harder to obtain authorizations and slower follow through with smaller networks and therefore, closed networks to new providers entering the market in most Texas HHSC regions.

Additionally, in an attempt to distinguish the usage of personnel who do render therapy care, the new policy requirement of special coding for therapy assistants’ work in treatment billing, the assistants’ work will be reduced a further 70% of those new contracted rates. The irony of such circumstances is that these reductions for assistants will be far worse than the reimbursement proposal of 10/1/2015 from TxHHSC that is currently being blocked by the injunction – the equivalent of 49% (52.5%) of the PMR respectively for home health (office settings) for those to be at 70% (75%) of the PMR for regular billing. For those already below those contract rates, say at a discounted rate of R% of the PMR, assistants’ work will be reimbursed at 70% of those rates or (0.7)R% of the PMR.

There may be a double irony here as well. MCOs who contract with the TxHHSC (and the Texas taxpayer) are obliged to keep access to care open and clear for Medicaid recipients in Texas. This is partially achieved by having adequately sufficient provider networks and coverage throughout Texas and to provide Medicaid recipients with the quality of care and access to it with sufficient education towards that end. However, by dramatically reducing provider reimbursement, MCOs endanger access to care by the threat of reducing the size of those provider networks through unreasonable reimbursement contracts. The question of adequate access to care was at the center of the arguments in the current injunction proceedings. Will this argument then be shifted to the apparent apparatus being proposed by Texas Medicaid MCOs’ reduced reimbursement contracts?

This new potential argument becomes confounded by the state requirement that a contracted MCO cannot profit beyond a certain net margin (2%) with a simultaneous ceiling on administrative overhead. If the TxHHSC’s intention was to shift the burden of therapy services overhead back to the provider, despite any potentially favorable outcome of the injunction towards the provider, through the actions of the MCO, then that action may represent a usurping of that injunction. How is managed care power displayed by the anti-business effects on providers from instantaneous MCO contract adjustments balanced fairly by the market and our social safety net of Medicaid rules?


The plaintiffs in the injunction have amended their suit to now enjoin (added as a co-defendant) Superior. The presiding injunction judge will be hearing arguments to this amendment next week. It appears through various interviews with providers and others, but not proven conclusively, that Superior may have taken their cue from the TxHHSC’s insistence on lowering therapy reimbursements rates in exchange for continuing their state contracts as a Medicaid MCO. Additionally, there is anecdotal evidence and personal discussion that Superior may have been informing therapy providers that TMHP had told them to lower their reimbursements in conjunction with the roundup of new policies that would include the new modifier code for utilizing assistant therapists.

The two allegations against Superior sighted above, if true, may point to a collusion to circumvent the current injunction. While presently, these allegations are unsubstantiated from lack of clearly written and oral evidence from Superior, TxHHSC, and TMHP, they would, nonetheless, represent a grave legal usurpation of the injunction and subsequent development in the Medicaid therapy reimbursement struggle in Texas.

Additionally, the flat 70% discount rate for utilizing therapy assistants seems to be a uniform change among all new participating MCO contracts. It remains to be clarified if the 70% discount is towards any new reduced contract rates or to the PMR. We have received conflicting information on this interpretation. This is an important distinction since the difference between these two interpretations could be up to 22.5% of the PMR for therapy office settings and 21% of the PMR for therapy home health at the 75% (70%) new rates respectively. For those at the lowest contracted rate of 50% of the PMR, the new assistants’ billing will be at (.7)(.5) = .35 (35%) of the PMR. This lowest reimbursement would be one of the lowest Medicaid rates, if not the lowest rate, in the nation and substantially lower than the Medicare rate, in any event. It would, in all likelihood, represent not only an unreasonably low reimbursement for the therapy business but a clear indication of an intent to endanger access to therapy care, that is a crucial concomitant treatment for children, for Medicaid recipients in Texas.