Medicaid fraud control units (MCFUs) to receive Federal funding for data mining activities to identify fraud

Effective June 17, 2013, state Medicaid fraud control units (MCFUs) will be authorized to receive Federal funding for data mining, an audit technique used to identify Medicaid provider fraud. The Department of Health and Human Services Department (HHS) released a final rule on May 17, 2013, which modified an existing regulation prohibiting MCFUs from Federal funding participation (FFP).

Data mining tools and methods electronically screen, sort, and analyze state Medicaid data to identify Medicaid fraud. Advances in data mining technology benefit MCFUs by increasing investigative effectiveness. According to interpretations of the 1978 FFP regulations, state MCFUs are prohibited from receiving federal funds for the use of data mining. As a result of the technological advances now available, this final rule modernizes the regulations adopted in 1978.

To ensure effective funding and use of data mining of MCFUs, MCFUs must adhere to three essential elements:
1. Coordination between state Medicaid agencies and MCFUs in data mining activities.
2. Coordination between state Medicaid agencies and MCFUs on policy change and consistent practice and interpretation.
3. Appropriate staff training on data mining techniques.

Additionally, MCFUs must identify their plan of compliance to the above elements in a written agreement with state Medicaid agencies. Agreements may then be approved for a period of three years. In order to ensure appropriate usage of FFP funding, MCFUs must detail their progress and expenses in their annual report. OIG will use this information to monitor and oversee the MCFUs.

Federal reimbursements to MCFUs for data mining activities will increase effectiveness and efficiency in identifying Medicaid fraud and assist state officials in anti-fraud investigation and monitoring. The timing of this increase in state Medicaid auditing power coincides with the expansion of state Medicaid programs under the Patient Protection and Affordable Care Act, which increases federal funding for states that elect to expand the eligibility criteria for individuals to enroll in the Medicaid program. In response, Medicaid providers must be diligent in their compliance plans to avoid Medicaid audits in the future. If you, or your healthcare entity, need assistance in developing an effective compliance plan, or if you have any audit concerns, please contact an experienced Wachler & Associates health care attorney at 248-544-0888.