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California Department of Health Care Services . Audits and Investigations, Medical Review Branch, March 2008. Audits & Investigations Mission Statement. To protect the fiscal integrity of California’s publicly funded health care programs.

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california department of health care services

California Department of Health Care Services

Audits and Investigations,

Medical Review Branch,

March 2008

audits investigations mission statement
Audits & Investigations Mission Statement
  • To protect the fiscal integrity of California’s publicly funded health care programs.
  • To ensure quality health care services are delivered to Medi-Cal Beneficiaries.
medi cal fraud
Medi-Cal Fraud
  • Medi-Cal fraud represents a complex and multi-faceted problem.
  • New fraudulent schemes continue to surface.
  • Unscrupulous providers are continually testing our ability to identify misuse of the Medi-Cal Program.
what does fraud look like
What does fraud look like?
  • Fraud presents itself in many forms:

 Improper use of beneficiary IDs

 Providers rendering services that vary from norms

 Providers billing for services not rendered

 Providers exploiting vulnerable populations for economic gain

 Improper use of provider IDs

 Providing services that are not medically necessary

 Payment of “kickbacks” to beneficiaries (capping) in order to bill Medi-Cal for unnecessary services

 Failure to disclose true ownership on Medi-Cal application (willful misrepresentation)

 Up coding to obtain a higher rate of reimbursement

the cost of fraud
The Cost of Fraud
  • Research confirms that fraud costs the Program a great deal.
  • Small numbers of beneficiaries can generate repetitious billings by providers for enormous sums in fraudulent payments.
  • Collusion among providers is a popular scheme utilized to defraud the Medi-Cal Program.
the cost of fraud is significant
The Cost of Fraud is Significant
  • 1,915 beneficiaries during a 12 month period cost the Medi-Cal program $67,000,000 in outpatient services
  • Or, $34,987 per-user
  • Or, $2,916 per user-per-month
anti fraud savings
Anti-Fraud Savings
  • As a result of Anti-Fraud efforts over $2 billion savings since 1999
cumulative anti fraud savings july 1 1998 through june 30 2007



Temporary Suspensions

Special Claims Review

Provider Prior Authorization

Field Audit Reviews/UC

Audits for Recovery

Lab Reviews


BIC Replacement

TOTAL $1,204,541,873



Lab Enrollment

Managed Care

TOTAL $752,415,141


Criminal Convictions

Civil Judgments/Settlements

TOTAL $ 138,413,550

Court Ordered Restitution

TOTAL $78.9 million

Cumulative Anti-Fraud SavingsJuly 1, 1998 through June 30, 2007
data sharing with cms
Data sharing with CMS
  • California was the first state to partner with the Federal Centers for Medicare and Medicaid Services (CMS) in data-sharing on providers
  • Provides more detailed information on suspect providers
key legislation
Key Legislation
  • AB1699 (2002)

Added Section 100185.5 to the Health and Safety Code and authorizes the Director to deny continued enrollment, suspend, or withhold payments to a Medi-Cal Provider if they duplicate fraud from one program to another or have had multiple utilization controls.

  • SB 857 – (2004)

Amends several sections of the Welfare and Institution Code (W&I) adding provisional provider status, providing DHCS with the ability to levy civil money penalties, collect overpayments in a more timely manner, and impose procedure code limitations when warranted.

  • AB 530 – (2006)

Added Section 14123.05 to the W&I Code and became effective January 2007. Gives sanctioned Medi-Cal providers the opportunity to participate in meet & confer meetings with DHCS.

investigations branch investigations reviews and techniques
Investigations Branch Investigations, Reviews and Techniques
  • The Investigations Branch (IB) is charged with the responsibility to protect the fiscal integrity of the California’s publicly funded health care programs.
  • IB Fraud Investigators are sworn law enforcement officers who conduct criminal and civil investigations into various Medi-Cal program fraud, both beneficiary and providers.
  • Medi-Cal Beneficiary Fraud:
    • Early Fraud Detection Program (EFDP)
    • Income Verification Eligibility Verification System (IEVS)
    • Failure to Report Other Insurance Coverage
    • Drug Utilization Enforcement (DUE)
    • Social Security – Cooperative Disability Investigations
    • In Home Support Services
    • Women, Infants and Children Program (WIC)
    • Vital Statistics Investigations
allied agencies
Allied Agencies
  • IB Fraud Investigators work with numerous allied agencies, including:
    • The county welfare departments, eligibility workers, social workers, the special investigative units (Welfare Fraud Investigators) and the county Auditor Controllers Office
    • Federal Agencies:
      • The FBI, Health and Human Services, the Social Security Administration, Federal Courts, Housing Utilization and Development (HUB) and the Drug Enforcement Administration
    • State Departments:
      • The State Controllers Office, Franchise Tax Board, Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse, the Bureau of Narcotics Enforcement, State Department of Social Services, Adult Programs and Fraud Bureau, the California Welfare Fraud Investigators Association, the California Department of Consumer Affairs, Department of Mental Health, Alcohol and Drug Program, Department of Development Disabled and the Highway Patrol
    • City and Local Departments:
      • Police and sheriff, county grand juries and county counsel
2007 payment error rate measurement perm
2007 Payment Error Rate Measurement (PERM)
  • The Centers for Medicare & Medicaid Services (CMS) implemented the PERM program to measure improper payments in the Medicaid program and the State Children's Health Insurance Program (SCHIP).
  • PERM is designed to comply with the Improper Payments Information Act of 2002 (IPIA; Public Law 107-300), which requires a report to Congress.
  • Three contractors perform statistical calculations, medical records collection, claims review and medical/data processing review of selected State Medicaid and SCHIP fee-for-service (FFS) and managed care claims.
2007 payment error rate measurement perm14
2007 Payment Error Rate Measurement (PERM)
  • In FY 2006, CMS reviewed only fee-for-service Medicaid claims.
  • In FY 2007, PERM was expanded to include reviews of fee-for-service and managed care claims, as well as beneficiary eligibility, in both the Medicaid and SCHIP programs.
  • Each state participates in the PERM program once every 3 years (17 states per year) on a rotational basis. All 50 states are reviewed every 3 years.
  • California is a year 2 state (2007, 2010, 2013…).
2007 payment error rate measurement perm15
2007 Payment Error Rate Measurement (PERM)
  • Based upon the error rate, states must return their Federal share of overpayments within 60 days.
  • CMS published the final rule for PERM on August 31, 2007, which sets forth State requirements for submitting claims and policies to the CMS Federal contractors for purposes of conducting fee-for-service and managed care reviews. This final rule also sets forth the State requirements for conducting eligibility reviews and estimating case and payment error rates due to errors in eligibility determinations.
  • The California MPES is the equivalent to the PERM.
medi cal payment error study mpes
Medi-Cal Payment Error Study (MPES)
  • The first MPES was conducted in 2004. DHCS is currently conducting the fourth annual MPES.
  • The MPES has been conducted yearly. After this year, MPES will be conducted every two years.
  • This study allows the State to measure the error rate of payments for Medi-Cal services and will enhance the system used to assure proper payment for services rendered to Medi-Cal beneficiaries.
medi cal payment error study mpes17
Medi-Cal Payment Error Study (MPES)
  • The 2007 MPES is a review of a sample of claims that were paid between April 1, 2007 and June 30, 2007 to determine if the documentation of service supports the claims submitted for Medi-Cal reimbursement.
  • The MPES develops an estimate of dollar loss due to potential fraud, identifies and quantifies program vulnerabilities, and identifies how best to deploy Medi-Cal antifraud resources.
evaluation activities
Evaluation Activities
  • Audits for Recovery
  • Enrollment Reviews
  • Utilization Reviews
  • Field Audit Reviews (Pre-Payment)
  • Special Projects
Utilization Controls

Post Service Pre Payment Audit (SCR)

Prior Authorization

Civil Money Penalty (Warning Notices)



Temporary Suspension

Procedure Code Limitation

Permissive Suspension

Mandatory Suspension

Immediate Suspension

Civil Money Penalty

(Imposition of Fines)

number of sanctions imposed
Number of Sanctions Imposed

Type# ofOpen


AFR 46

Biller Reviews 1

Desk Audits 33

Education Reviews 1

Enrollments 54

FAR 133

Referrals 8

Special Projects 10

number of cases currently on sanction
Number of Cases Currently on Sanction

Type of # of


PPA 73

CMP - First

WarningLtr 748

TS 407

WH 321

SCR 287

PCL 173

** According to the Medi-Cal PCL list on Medi-Cal website there are only 72 providers on PCL

number of cases on which sanctions were placed
Number of Cases on Which Sanctions Were Placed

# of Providers


PPA 0 3


Warning Ltr 305 204

TS 70 63

WH 69 34

SCR 196 159

PCL 79 134

contact information
  • The DHCS Medi-Cal Fraud Hotline telephone number: 1-800-822-6222
  • The recorded message may be heard in English and four other languages: Spanish, Vietnamese, Cambodian, and Russian. The call is free and the caller may remain anonymous.
  • You can also send an e-mail to: