Colorado Medicaid False Claims Act: May 2010

In the closing days of the 2010 legislative session, the Colorado Legislature passed significant revisions to the Colorado Medicaid system that will have long term impact on health care providers that participate in Colorado Medicaid. On May 26, 2010, Senate Bill 10-167 (2010) was signed as part of a series of legislation aimed at increasing cost-savings and efficiencies in the Colorado health care system.

It legislates certain changes to the administration of Colorado Medicaid in an effort to increase efficiency, and it amends the Medicaid false claim statute to mirror the federal False Claims Act.

Increased Efficiency in Medicaid Administration

The Legislative Declaration provides insight into the purpose behind SB 10-167, by stating: "It is the intent of the General Assembly that the implementation of this act shall result in significant reduction in the general fund expenditures for public medical benefits." Translation: the Legislature wants to improve Medicaid efficiency in order to reduce Medicaid spending. Alternatively, the Legislature is directing the Department of Health Care Policy and Financing to make sure it spends Medicaid funds wisely. The highlights of the administrative changes make Colorado Medicaid a more sophisticated payor and include:

• Introduction of Correct Coding Initiative for prepayment review. Medicaid will have more sophisticated claim payment edits to prevent it from paying for services that are not covered or are not billed properly. If providers don't act to make sure their billing policies match Medicaid requirements, they can expect more denials.
• Creation of an Internal Audit Division to perform internal Department audits and to conduct and supervise performance audits to determine efficiency and effectiveness of Medicaid programs. Every payor wants to pay for good outcomes, not merely services. This should contribute to Colorado Medicaid's ability to do so.
• Chief Medical Officer now required and funded at a level to allow for recruiting and retaining a senior level medical advisor.
• Establishment of a process to review other state Medicaid enrollment to avoid double coverage for clients. This will permit Colorado Medicaid to limit enrollment of persons who are already enrolled in the Medicaid program of another state.

Revised Colorado False Claims Act

SB 10-167 amends and broadens the scope of the Colorado Medicaid False Claims Act (the "Co. FCA"), which is housed in C.R.S. §§ 25.5-4-304 to 25.5-4-310. These revisions essentially make the Co. FCA comparable to the federal False Claims Act, 31 U.S.C. § 3729. The significant changes include:

• Increased penalties from a maximum civil fine of two times damages plus $5,000 per claim to a new maximum civil fine of three times damages plus $10,000 per claim.
• Changing the liability provisions to mirror the standards for liability under the federal False Claims Act. Generally, this expands the scope of conduct that is actionable under the Co. FCA.
• New whistleblower provisions, including establishment of a qui tam process by which a person can file a false claim lawsuit on behalf of the State, and be paid a percentage (up to 25%) of the recovery. The whistleblower provisions also include a new cause of action for retaliation.
• Expansion of the Attorney General's ability to investigate potential Medicaid fraud cases by authorizing the Attorney General to issue "civil investigative demands," which expands the Attorney General's ability to subpoena documents and compel the deposition of individuals prior to the filing of a lawsuit.

Implications For Providers

We see SB 10-167 as requiring a change in expectations with regard to the Medicaid program. First, expect more scrutiny of Medicaid claims. This means more denials, more pre-payment reviews, and more coverage issues. Second, expect more investigation of Medicaid claims as potential violations of the Co. FCA. What in the past may have been seen as a billing error may now be reviewed as a potential fraud. The best way for prudent health care providers to respond to SB 10-167 is to use it as the basis to review and tighten-up their policies and procedures related to Medicaid billing and compliance.