Sparks’s bill widens Medicaid administrative penalties

The text as introduced · 4,245 words

2025S0051-1 01/30/25

By: Sparks
S.B. No. 1038

A BILL TO BE ENTITLED

AN ACT

relating to administrative remedies for certain fraud and abuse

violations under Medicaid; providing administrative penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Sections 544.0205(a) and (b), Government Code,

as effective April 1, 2025, are amended to read as follows:

(a) The commission may grant an award to an individual who

reports activity that constitutes fraud or abuse of Medicaid funds

or who reports Medicaid overcharges if the commission determines

that the disclosure results in the recovery of a remedy [ an

administrative penalty ] imposed under Section 32.039, Human

Resources Code. The commission may not grant an award to an

individual in connection with a report if the commission or

attorney general had independent knowledge of the activity the

individual reported.

(b) The commission shall determine the amount of an

award. The award may not exceed five percent of the amount of the

remedy [ administrative penalty ] imposed under Section 32.039,

Human Resources Code, that resulted from the individual's

disclosure. In determining the award amount, the commission:

(1) shall consider how important the disclosure is in

ensuring the fiscal integrity of Medicaid; and

(2) may consider whether the individual participated

in the fraud, abuse, or overcharge.

SECTION 2. The heading to Section 32.039, Human Resources

Code, is amended to read as follows:

Sec. 32.039. ADMINISTRATIVE REMEDIES [ DAMAGES AND

PENALTIES ].

SECTION 3. Section 32.039(a), Human Resources Code, is

amended by amending Subdivision (1) and adding Subdivision (3-a) to

read as follows:

(1) "Claim" means an application , request, or demand

for a benefit or payment [ of health care services ] under Title XIX

of the [ federal ] Social Security Act (42 U.S.C. Section 1396 et

seq.) [ that is submitted by a person who is under a contract or

provider agreement with the commission ].

(3-a) "Material" means having a natural tendency to

influence or to be capable of influencing.

SECTION 4. Section 32.039, Human Resources Code, is amended

by adding Subsections (a-1), (a-2), and (c-1) and amending

Subsections (b), (c), (d), (f), (g), (h), (i), (l), (m), (n), (o),

(p), (q), (r), (s), and (x) to read as follows:

(a-1) For purposes of this section, a person acts knowingly

with respect to information if the person:

(1) has knowledge of the information;

(2) acts with conscious indifference to the truth or

falsity of the information; or

(3) acts in reckless disregard of the truth or falsity

of the information.

(a-2) Proof of a person's specific intent to violate this

section is not required in an administrative or civil proceeding to

show that the person acted knowingly with respect to information.

(b) A person commits a violation if the person:

(1) knowingly submits [ presents ] or causes to be

submitted [ presented to the commission ] a claim that contains a

false statement , misrepresentation, or omission of a material fact

[ representation the person knows or should know to be false ];

(2) [ (1-a) ] engages in conduct that violates Section

102.001, Occupations Code;

(3) [ (1-b) ] solicits or receives, directly or

indirectly, overtly or covertly any remuneration, including any

kickback, bribe, or rebate, in cash or in kind for referring an

individual to a person for the furnishing of, or for arranging the

furnishing of, any item or service for which payment may be made, in

whole or in part, under the medical assistance program, provided

that this subdivision does not prohibit the referral of a patient to

another practitioner within a multispecialty group or university

medical services research and development plan (practice plan) for

medically necessary services;

(4) [ (1-c) ] solicits or receives, directly or

indirectly, overtly or covertly any remuneration, including any

kickback, bribe, or rebate, in cash or in kind for purchasing,

leasing, or ordering, or arranging for or recommending the

purchasing, leasing, or ordering of, any good, facility, service,

or item for which payment may be made, in whole or in part, under the

medical assistance program;

(5) [ (1-d) ] offers or pays, directly or indirectly,

overtly or covertly any remuneration, including any kickback,

bribe, or rebate, in cash or in kind to induce a person to refer an

individual to another person for the furnishing of, or for

arranging the furnishing of, any item or service for which payment

may be made, in whole or in part, under the medical assistance

program, provided that this subdivision does not prohibit the

referral of a patient to another practitioner within a

multispecialty group or university medical services research and

development plan (practice plan) for medically necessary services;

(6) [ (1-e) ] offers or pays, directly or indirectly,

overtly or covertly any remuneration, including any kickback,

bribe, or rebate, in cash or in kind to induce a person to purchase,

lease, or order, or arrange for or recommend the purchase, lease, or

order of, any good, facility, service, or item for which payment may

be made, in whole or in part, under the medical assistance program;

(7) [ (1-f) ] provides, offers, or receives an

inducement in a manner or for a purpose not otherwise prohibited by

this section or Section 102.001, Occupations Code, to or from a

person, including a recipient, provider, employee or agent of a

provider, third-party vendor, or public servant, for the purpose of

influencing or being influenced in a decision regarding:

(A) selection of a provider or receipt of a good

or service under the medical assistance program;

(B) the use of goods or services provided under

the medical assistance program; or

(C) the inclusion or exclusion of goods or

services available under the medical assistance program;

(8) knowingly makes or causes to be made a false

statement or misrepresentation of a material fact to permit a

person to receive a benefit or payment under the medical assistance

program that is not authorized or that is greater than the

authorized benefit or payment;

(9) knowingly conceals or fails to disclose

information that permits a person to receive a benefit or payment

under the medical assistance program that is not authorized or that

is greater than the authorized benefit or payment;

(10) knowingly applies for and receives a benefit or

payment on behalf of another person under the medical assistance

program and converts any part of the benefit or payment to a use

other than for the benefit of the person on whose behalf it was

received;

(11) knowingly makes, causes to be made, induces, or

seeks to induce the making of a false statement or

misrepresentation of a material fact concerning the condition or

operation of a facility in order for the facility to meet

certification or recertification standards required to participate

under the medical assistance program, including:

(A) a hospital;

(B) a nursing facility;

(C) a hospice provider;

(D) an intermediate care facility for

individuals with an intellectual disability;

(E) an assisted living facility; or

(F) a home and community support services agency;

(12) knowingly makes, causes to be made, induces, or

seeks to induce the making of a false statement or

misrepresentation of a material fact concerning information

required to be provided under a federal or state law, rule, or

provider agreement pertaining to the medical assistance program;

(13) knowingly presents or causes to be presented a

claim for payment for a product provided or a service rendered by a

person who:

(A) is not licensed to provide the product or

render the service, if a license is required; or

(B) is not licensed in the manner claimed;

(14) knowingly makes or causes to be made a claim for:

(A) a service or product that has not been

approved or accepted by a treating physician or health care

practitioner;

(B) a service or product that is substantially

inadequate or inappropriate as compared to generally recognized

standards within the particular discipline or within the health

care industry; or

(C) a product that has been adulterated, debased,

or mislabeled, or that is otherwise inappropriate;

(15) makes a claim and knowingly fails to indicate the

type of license of the provider who actually provided the service;

(16) makes a claim and knowingly fails to indicate the

identification number of the licensed provider who actually

provided the service;

(17) knowingly obstructs the office of inspector

general from carrying out the office's duties under Section

544.0103, Government Code;

(18) knowingly makes, uses, or causes the making or

use of a false record or statement material to an obligation to pay

or transmit money or property to this state under the medical

assistance program, or knowingly conceals or knowingly and

improperly avoids or decreases an obligation to pay or transmit

money or property to this state under the medical assistance

program;

(19) [ (2) ] is a managed care organization that

contracts with the commission to provide or arrange to provide

health care benefits or services to individuals eligible for

medical assistance and:

(A) fails to provide to an individual a health

care benefit or service that the organization is required to

provide under the contract with the commission;

(B) fails to provide to the commission or other

appropriate agency information required to be provided by law,

commission or agency rule, or contractual provision;

(C) engages in a fraudulent activity in

connection with the enrollment in the organization's managed care

plan of an individual eligible for medical assistance or in

connection with marketing the organization's services to an

individual eligible for medical assistance; or

(D) engages in actions that indicate a pattern

of:

(i) wrongful denial of payment for a health

care benefit or service that the organization is required to

provide under the contract with the commission; or

(ii) wrongful delay of at least 45 days or a

longer period specified in the contract with the commission, not to

exceed 60 days, in making payment for a health care benefit or

service that the organization is required to provide under the

contract with the commission;

(20) [ or

[ (3) ] fails to maintain documentation to support a

claim for payment in accordance with the requirements specified by

commission rule or medical assistance program policy ; or

(21) engages in any other conduct that a commission

rule has defined as a violation of the medical assistance program.

(c) A person who commits a violation under Subsection (b) is

liable to the commission for the following administrative remedy :

(1) the amount paid or benefit received , if any,

directly or indirectly as a result of the violation , including any

payment made to a third party, and interest on that amount

determined at the rate provided by law for legal judgments and

accruing from the date on which the payment was made; and

(2) payment of an administrative penalty of an amount

not to exceed twice the amount paid, if any, as a result of the

violation, plus an amount:

(A) not less than $5,000 or more than $15,000 or

the maximum dollar amount imposed as provided by 31 U.S.C. Section

3729(a)(1), if that amount exceeds $15,000, for each violation that

results in injury to an elderly person, as defined by Section

48.002(a)(1), a person with a disability, as defined by Section

48.002(a)(8)(A), or a person younger than 18 years of age; or

(B) not more than $10,000 or the maximum dollar

amount imposed as provided by 31 U.S.C. Section 3729(a)(1), if that

amount exceeds $10,000, for each violation that does not result in

injury to a person described by Paragraph (A).

(c-1) For purposes of Subsection (c)(2), each day a person

violates Subsection (b)(17), (18), or (19) constitutes a separate

violation.

(d) Unless the provider knowingly submitted false or

misleading information to the commission for use in preparing a

voucher [ that the provider knew or should have known was false ] or

knowingly failed to correct false or misleading information [ that

the provider knew or should have known was false ] when provided an

opportunity to do so, this section does not apply to a claim based

on the voucher if the commission calculated and printed the amount

of the claim on the voucher and then submitted the voucher to the

provider for the provider's signature. In addition, the provider's

signature on the voucher does not constitute fraud. The executive

commissioner shall adopt rules that establish a grace period during

which errors contained in a voucher prepared by the commission may

be corrected without penalty to the provider.

(f) If after an examination of the facts the commission

concludes that the person committed a violation, the commission may

issue a preliminary report stating the facts on which it based its

conclusion, recommending that an administrative remedy [ penalty ]

under this section be imposed and recommending the amount of the

proposed remedy [ penalty ].

(g) The commission shall give written notice of the report

to the person charged with committing the violation. The notice

must include :

(1) a brief summary of the [ facts, a statement of the

amount of the ] recommended remedy; [ penalty, ] and

(2) a statement of the person's right to an informal

review of :

(A) the alleged violation ;

(B) [ , ] the amount of the recommended remedy;

[ penalty, ] or

(C) both the alleged violation and the amount of

the recommended remedy [ penalty ].

(h) Not later than the 10th day after the date on which the

person charged with committing the violation receives the notice,

the person may either give the commission written consent to the

report, including the recommended remedy [ penalty ], or make a

written request for an informal review by the commission.

(i) If the person charged with committing the violation

consents to the remedy [ penalty ] recommended by the commission or

fails to timely request an informal review, the commission shall

assess the remedy [ penalty ]. The commission shall give the person

written notice of its action. The person shall pay the remedy

[ penalty ] not later than the 30th day after the date on which the

person receives the notice.

(l) If, after informal review, a person who has been ordered

to pay a remedy [ penalty ] fails to request a formal hearing in a

timely manner, the commission shall assess the remedy [ penalty ].

The commission shall give the person written notice of its action.

The person shall pay the remedy [ penalty ] not later than the 30th

day after the date on which the person receives the notice.

(m) Within 30 days after the date on which the commission's

order issued after a hearing under Subsection (k) becomes final as

provided by Section 2001.144, Government Code, the person shall:

(1) pay the amount of the remedy [ penalty ];

(2) pay the amount of the remedy [ penalty ] and file a

petition for judicial review contesting the occurrence of the

violation, the amount of the remedy [ penalty ], or both the

occurrence of the violation and the amount of the remedy [ penalty ];

or

(3) without paying the amount of the remedy [ penalty ],

file a petition for judicial review contesting the occurrence of

the violation, the amount of the remedy [ penalty ], or both the

occurrence of the violation and the amount of the remedy [ penalty ].

(n) A person who acts under Subsection (m)(3) within the

30-day period may:

(1) stay enforcement of the remedy [ penalty ] by:

(A) paying the amount of the remedy [ penalty ] to

the court for placement in an escrow account; or

(B) giving to the court a supersedeas bond that

is approved by the court for the amount of the remedy [ penalty ] and

that is effective until all judicial review of the commission's

order is final; or

(2) request the court to stay enforcement of the

remedy [ penalty ] by:

(A) filing with the court a sworn affidavit of

the person stating that the person is financially unable to pay the

amount of the remedy [ penalty ] and is financially unable to give the

supersedeas bond; and

(B) giving a copy of the affidavit to the

executive commissioner by certified mail.

(o) If the executive commissioner receives a copy of an

affidavit under Subsection (n)(2), the executive commissioner may

file with the court, within five days after the date the copy is

received, a contest to the affidavit. The court shall hold a hearing

on the facts alleged in the affidavit as soon as practicable and

shall stay the enforcement of the remedy [ penalty ] on finding that

the alleged facts are true. The person who files an affidavit has

the burden of proving that the person is financially unable to pay

the amount of the remedy [ penalty ] and to give a supersedeas bond.

(p) If the person charged does not pay the amount of the

remedy [ penalty ] and the enforcement of the remedy [ penalty ] is not

stayed, the commission may forward the matter to the attorney

general for enforcement of the remedy [ penalty ] and interest as

provided by law for legal judgments. An action to enforce a remedy

[ penalty ] order under this section must be initiated in a court of

competent jurisdiction in Travis County or in the county in which

the violation was committed.

(q) Judicial review of a commission order or review under

this section assessing a remedy [ penalty ] is under the substantial

evidence rule. A suit may be initiated by filing a petition with a

district court in Travis County, as provided by Subchapter G,

Chapter 2001, Government Code.

(r) If a remedy [ penalty ] is reduced or not assessed, the

commission shall remit to the person the appropriate amount plus

accrued interest if the remedy [ penalty ] has been paid or shall

execute a release of the bond if a supersedeas bond has been posted.

The accrued interest on amounts remitted by the commission under

this subsection shall be paid at a rate equal to the rate provided

by law for legal judgments and shall be paid for the period

beginning on the date the remedy [ penalty ] is paid to the commission

under this section and ending on the date the remedy [ penalty ] is

remitted.

(s) A remedy [ damage, cost, or penalty ] collected under this

section is not an allowable expense in a claim or cost report that

is or could be used to determine a rate or payment under the medical

assistance program.

(x) Subsections (b)(3) [ (b)(1-b) ] through (7) [ (1-f) ] do

not prohibit a person from engaging in:

(1) generally accepted business practices, as

determined by commission rule, including:

(A) conducting a marketing campaign;

(B) providing token items of minimal value that

advertise the person's trade name; and

(C) providing complimentary refreshments at an

informational meeting promoting the person's goods or services;

(2) the provision of a value-added service if the

person is a managed care organization; or

(3) other conduct specifically authorized by law,

including conduct authorized by federal safe harbor regulations (42

C.F.R. Section 1001.952).

SECTION 5. Section 32.0391(a), Human Resources Code, is

amended to read as follows:

(a) A person commits an offense if the person intentionally

or knowingly commits a violation under Section 32.039(b)(3), (4),

(5), (6), or (7) [ 32.039(b)(1-b), (1-c), (1-d), (1-e), or (1-f) ].

SECTION 6. Section 36.002, Human Resources Code, is amended

to read as follows:

Sec. 36.002. UNLAWFUL ACTS. A person commits an unlawful

act if the person:

(1) knowingly makes or causes to be made a false

statement or misrepresentation of a material fact to permit a

person to receive a benefit or payment under a health care program

that is not authorized or that is greater than the benefit or

payment that is authorized;

(2) knowingly conceals or fails to disclose

information that permits a person to receive a benefit or payment

under a health care program that is not authorized or that is

greater than the benefit or payment that is authorized;

(3) knowingly applies for and receives a benefit or

payment on behalf of another person under a health care program and

converts any part of the benefit or payment to a use other than for

the benefit of the person on whose behalf it was received;

(4) knowingly makes, causes to be made, induces, or

seeks to induce the making of a false statement or

misrepresentation of material fact concerning:

(A) the conditions or operation of a facility in

order that the facility may qualify for certification or

recertification required by a health care program, including

certification or recertification as:

(i) a hospital;

(ii) a nursing facility or skilled nursing

facility;

(iii) a hospice;

(iv) an ICF-IID;

(v) an assisted living facility; or

(vi) a home health agency; or

(B) information required to be provided by a

federal or state law, rule, regulation, or provider agreement

pertaining to a health care program;

(5) except as authorized under a health care program,

knowingly pays, charges, solicits, accepts, or receives, in

addition to an amount paid under the program, a gift, money, a

donation, or other consideration as a condition to the provision of

a service or product or the continued provision of a service or

product if the cost of the service or product is paid for, in whole

or in part, under the program;

(6) knowingly presents or causes to be presented a

claim for payment under a health care program for a product provided

or a service rendered by a person who:

(A) is not licensed to provide the product or

render the service, if a license is required; or

(B) is not licensed in the manner claimed;

(7) knowingly makes or causes to be made a claim under

a health care program for:

(A) a service or product that has not been

approved or acquiesced in by a treating physician or health care

practitioner;

(B) a service or product that is substantially

inadequate or inappropriate when compared to generally recognized

standards within the particular discipline or within the health

care industry; or

(C) a product that has been adulterated, debased,

or mislabeled, or that is otherwise inappropriate;

(8) makes a claim under a health care program and

knowingly fails to indicate the type of license and the

identification number of the licensed health care provider who

actually provided the service;

(9) conspires to commit a violation of Subdivision

(1), (2), (3), (4), (5), (6), (7), (8), (10), (11), (12), or (13);

(10) is a managed care organization that contracts

with the commission or other state agency to provide or arrange to

provide health care benefits or services to individuals eligible

under a health care program and knowingly:

(A) fails to provide to an individual a health

care benefit or service that the organization is required to

provide under the contract;

(B) fails to provide to the commission or

appropriate state agency information required to be provided by

law, commission or agency rule, or contractual provision; or

(C) engages in a fraudulent activity in

connection with the enrollment of an individual eligible under the

program in the organization's managed care plan or in connection

with marketing the organization's services to an individual

eligible under the program;

(11) knowingly obstructs an investigation by the

attorney general of an alleged unlawful act under this section;

(12) knowingly makes, uses, or causes the making or

use of a false record or statement material to an obligation to pay

or transmit money or property to this state under a health care

program, or knowingly conceals or knowingly and improperly avoids

or decreases an obligation to pay or transmit money or property to

this state under a health care program; or

(13) knowingly engages in conduct that constitutes a

violation under Section 32.039(b)(1), (2), (3), (4), (5), (6), (7),

or (17) [ 32.039(b) ].

SECTION 7. Section 36.006, Human Resources Code, is amended

to read as follows:

Sec. 36.006. APPLICATION OF OTHER LAW. The application of a

civil remedy under this chapter does not preclude the application

of another common law, statutory, or regulatory remedy, except that

a person may not be liable for a civil remedy under this chapter and

an administrative remedy [ civil damages or a penalty ] under Section

32.039 if the civil remedy and administrative remedy [ civil damages

or penalty ] are assessed for the same act.

SECTION 8. The following provisions of the Human Resources

Code are repealed:

(1) Section 32.039(a)(4); and

(2) Section 32.039(b-1).

SECTION 9. Section 32.039, Human Resources Code, as amended

by this Act, applies only to a violation that occurs on or after the

effective date of this Act. A violation that occurs before the

effective date of this Act is governed by the law in effect on the

date the violation occurred, and that law is continued in effect for

that purpose.

SECTION 10. If before implementing any provision of this

Act a state agency determines that a waiver or authorization from a

federal agency is necessary for implementation of that provision,

the agency affected by the provision shall request the waiver or

authorization and may delay implementing that provision until the

waiver or authorization is granted.

SECTION 11. This Act takes effect September 1, 2025.