Department of Health and Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
T S M
ENNESSEE  TATE  EDICAID 
 
 
F C U :   
RAUD  ONTROL  NIT   
 
2  012 O R
  NSITE  EVIEW 
   
 
 
 
 
 
    
   
   
   
   
   
   
 
 
 
 
   
  Stuart Wright  
 
Deputy Inspector General for 
 
Evaluation and Inspections 
 
April 2013 
OEI-06-12-00370   
   
EXECUTIVE SUMMARY:  TENNESSEE STATE MEDICAID FRAUD CONTROL UNIT:                       
2012 ONSITE REVIEW 
OEI-06-12-00370  
 
WHY WE DID THIS STUDY  
The Office of Inspector General (OIG) is responsible for overseeing the activities of all Medicaid 
Fraud Control Units (MFCU or Unit). As part of this oversight, OIG conducts periodic reviews 
of all Units and prepares public reports based on these reviews.  The reviews describe the Units 
caseloads; assess performance in accordance with the 12 MFCU performance standards; identify 
any opportunities for improvement; and identify any instances of noncompliance with laws, 
regulations, and policy transmittals.  
 
HOW WE DID THIS STUDY  
We based our review on an analysis of data from seven sources:  (1) a review of policies, 
procedures and documentation of the Units operations, staffing, and caseload; (2) a review of 
financial documentation; (3) structured interviews with key stakeholders; (4) a survey of Unit 
staff; (5) structured interviews with the Unit director and supervisors; (6) an onsite review of 
case files; and (7) an onsite review of Unit operations. 
 
WHAT WE FOUND  
For Federal fiscal years 2009 through 2011, the Tennessee Unit obtained 96 criminal convictions 
and 22 civil settlements, and reported recoveries of over $181 million.  We identified one 
instance of noncompliance with applicable laws, regulations, and policy transmittals:  the Unit 
investigated a case that was not eligible for Federal funding under Federal regulations.  With the 
exception of this instance, our review of compliance issues found no evidence of significant 
noncompliance with applicable laws, regulations, or policy transmittals.  We identified two 
instances in which the Unit did not fully meet Performance Standards.  The Unit referred all 
convicted health care providers to OIG for program exclusion, but did not refer nonprovider 
convictions. Although the Unit had a training plan, it did not establish training hour 
requirements for each professional discipline.  Additionally, despite Unit efforts to increase 
referrals, the State Medicaid Agency and managed care organizations sent a small number of 
fraud referrals to the Unit. Finally, Unit staff and stakeholders reported that involvement on 
various task forces was key to the Units productivity.   
 
WHAT WE RECOMMEND  
On the basis of these findings, we recommend that the Tennessee Unit:  (1) repay grant funds 
spent on the case that, under Federal regulations, was not eligible for Federal funding;  (2) refer 
all convictions to OIG, including nonprovider convictions, within 30 days; and (3) establish 
training hour requirements for professional disciplines.  The Unit did not concur with our first 
recommendation.  The Unit stated that it felt the case in question was within its purview.  We  
disagree with the Units opinion because the case in question was not one of the three eligible 
case types specified by Medicaid statute and Federal regulations:  investigation of allegations of 
fraud in the administration of the Medicaid program, in the provision of Medicaid services, or in 
the activities of Medicaid providers.  The Unit should work with OIG to determine ineligible 
costs.  
     
   
TABLE OF CONTENTS 
Objective..................................................................................................................1 

Background..............................................................................................................1 

Methodology............................................................................................................4 

Findings....................................................................................................................7 

For FYs 2009 through 2011, the Tennessee Unit obtained 96 criminal                       

convictions and 22 civil settlements, and reported recoveries of                                   

$181 million .................................................................................................7 

The Unit investigated one case that, although related to an appropriate 
case, was not eligible under Federal regulations for Federal funding .........8 

The Unit referred all convicted health care providers to OIG for                                     

program exclusion, but did not refer nonprovider convictions ....................8 

Although the Unit had a training plan, it did not establish                                       
training-hour requirements for each professional discipline .......................9 

Despite Unit efforts to increase referrals, the State Medicaid agency  
                                  
and MCOs sent a small number of fraud referrals to the Unit .....................9 

Unit staff and stakeholders cited involvement on various task                                        

forces as key to productivity......................................................................11 
 
Conclusion and Recommendations ........................................................................12 

Unit Comments and Office of Inspector General Response ......................13 

Appendix................................................................................................................14 

A: Performance Standards for Medicaid Fraud Control Units .................14 

B: Unit Comments ....................................................................................18 

Acknowledgments..................................................................................................20 

 
 
 
 
 
 
 
   
 
     
   
OBJECTIVE 
To conduct an onsite review of the Tennessee State Medicaid Fraud 
Control Unit (MFCU or Unit). 
BACKGROUND 
As established by Title XIX of the Social Security Act (SSA) (the 
Medicaid statute), the mission of State MFCUs is to investigate and 
prosecute Medicaid provider fraud and patient abuse and neglect under 
State law.1  Under the Medicaid statute, each State must maintain a 
certified Unit unless the Secretary of Health and Human Services (HHS) 
determines that operation of a Unit would not be cost-effective because 
(1) minimal Medicaid fraud exists in that State; and (2) the State has other, 
adequate safeguards to protect Medicaid beneficiaries from abuse and 
neglect.2  Currently, 49 States and the District of Columbia (States) have 
created such Units.3  In Federal fiscal year (FY) 2011, combined Federal 
and State grant expenditures for the Units totaled $208.6 million.4,     
Each Unit must employ an interdisciplinary staff that consists of at least an  
investigator, an auditor, and an attorney to carry out its duties and 
responsibilities in an effective and efficient manner.5 Unit staff review 
complaints provided by the State Medicaid agency and other sources and 
determine their potential for criminal prosecution.  In FY 2011, the 
50 Units collectively reported 1,230 convictions, 906 civil settlements or 
judgments, and recoveries of approximately $1.7 billion.6, 7   
 
1 Social Security Act (SSA)    1903(q)(3) and 1903(q)(4).  

2 SSA   1902(a)(61) and  1903(q)(3).  Regulations at 42 CFR   1007.11(b)(1) add that 

the Units responsibilities may include reviewing complaints of misappropriation  of  

patients private funds in  residential health care facilities. 

3  National Association of Medicaid Fraud Control Units (NAMFCU).  NAMFCU 

Participating States. Accessed at http://www.namfcu.net/states  on March 24, 2013.  

North Dakota and the territories of American Samoa, Guam, the Northern Mariana 

Islands, Puerto Rico, and the U.S. Virgin  Islands have not established Units. 

4  Office of  Inspector General (OIG) State Medicaid Fraud Control Units  Fiscal Year 

2011  Grant Expenditures and Statistics. Accessed at https://oig.hhs.gov/fraud/medicaid-
fraud-control-units-mfcu/expenditures_statistics/fy2011.asp on  March 29, 2013. 
  
5 SSA  1903(q)(6) and  42 CFR   1007.13.  

6 OIG,  State Medicaid Fraud Control Units  Fiscal Year 2011 Grant Expenditures and 

Statistics. Accessed at https://oig.hhs.gov/fraud/medicaid-fraud-control-units-
mfcu/expenditures_statistics/fy2011.asp on April 16, 2012. 
7 Ibid. Recoveries are defined as the amount  of money that defendants are required to 
pay as a result of a settlement, judgment, or  prefiling settlement in criminal and civil 
cases and may not reflect actual collections.  Recoveries may involve cases that include  
participation by other Federal and State agencies. 
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)   1   
   
The Medicaid statute requires Units to have either statewide authority to 
prosecute cases or formal procedures to refer suspected criminal violations  
to an office with such authority.8  If the Unit is in a State that does not 
have an entity with statewide authority to criminally prosecute individuals, 
the Unit must have formal procedures approved by OIG to ensure that 
cases are referred to State entities with criminal prosecutorial authority 
and that the State entities cooperate with the Unit.9  In 44 States, the Units 
are located within offices of State Attorneys General; in Tennessee and the 
remaining 5 States, the Units are located in other State agencies.10    
Each Unit must be a single, identifiable entity of State government, 
distinct from the single State Medicaid agency, and must develop a formal 
agreement (i.e., Memorandum of Understanding (MOU)) that describes its 
relationship with that agency.11   
Oversight of the MFCU Program 
The Secretary of HHS delegated to OIG the authority to annually certify the 
Units and to administer grant awards to reimburse States for a percentage of 
their costs of operating certified Units.12   All Units are currently federally 
funded on a 75-percent matching basis, with the States contributing the 
remaining 25 percent.13  To receive Federal reimbursement, each Unit must 
submit an application to OIG.14  OIG reviews the application and notifies the 
Unit if it is approved and certified.  Approval and certification are for a 
1-year period; the Unit must be recertified each year thereafter.15    
Under the Medicaid statute, States must operate Units that effectively carry 
out their statutory functions and meet program requirements.16 OIG 
developed and issued 12 performance standards to define the criteria it 
applies in assessing whether a Unit is effectively carrying out statutory 
 
8  SSA  1903(q)(1).  
9  SSA  1903(q)(1)(B).  
10 NAMFCU.  NAMFCU Participating States. Accessed at http://www.namfcu.net/states  
on  March 29, 2013.  
11 SSA  1903(q)(2);  42 CFR   1007.5 and 1007.9(d).   
12 The portion of funds reimbursed to States by the Federal  Government for its share of  
expenditures for the Federal  Medicaid program, including  the MFCUs, is  called Federal  
Financial Participation  (FFP). 
13 SSA  1903(a)(6)(B).  
14 42  CFR  1007.15(a).  
15 42  CFR  1007.15(b) and (c).  
16 SSA  1902(a)(61). 
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)   2   
   
functions and meeting program requirements.17  Examples of criteria include 
maintaining an adequate caseload through referrals from several sources, 
maintaining an annual training plan for all professional disciplines, and 
establishing policy and procedure manuals to reflect the Units operations.  
See Appendix A for a complete list of the performance standards used for 
this evaluation.  
Tennessee Medicaid Program 
TennCare, Tennessees Medicaid program, provides services primarily 
through managed care organizations (MCO).18, 19,  20   Tenncare contracts 
with and pays MCOs a fixed amount for enrolled beneficiaries.  Each 
MCO contracts with and pays medical providers of services to its 
beneficiaries. Tennessee contracts with four MCOs:  UnitedHealthcare 
Community Plan, BlueCare, TennCare Select, and Amerigroup.21   Total 
TennCare expenditures in Tennessee for FY 2011 were $8.4 billion.22   
Tennessee Unit  
The Tennessee Unit is housed within the Tennessee Bureau of  
Investigation (TBI). Neither TBI nor the Tennessee Attorney General has 
statewide criminal prosecutorial authority; therefore, under the Medicaid 
 
17 59 Fed. Reg. 49080 (Sept.  26, 1994).  Accessed at http://oig.hhs.gov/fraud/medicaid-
fraud-control-units-mfcu/files/Performance%20Standards.pdf  on August 15, 2012.  
Subsequent  to this  evaluation,  OIG published revised performance standards, effective 
June 1,  2012.  See 77  Fed. Reg.  32645  (June 1, 2012)  for the new  performance standards.  
Accessed at 
http://oig.hhs.gov/authorities/docs/2012/PerformanceStandardsFinal060112.pdf on  
August 15, 2012. 
18 The Centers for Medicare & Medicaid Services (CMS).  Medicaid Managed Care 
Enrollment Report. Accessed at http://www.medicaid.gov/Medicaid-CHIP-Program-
Information/By-Topics/Data-and-Systems/Downloads/2011-Medicaid-MC-Enrollment-
Report.pdf  on  March 29, 2013.   MCOs are,  generally, health plans that provide and  
coordinate  health care, in return  for a predetermined monthly fee, through a  defined  
network of physicians and hospitals. 
19 Ibid.  CMS classifies managed care plans as:  (1) Medicaid-only MCOs, 
(2) commercial MCOs, (3) prepaid inpatient health plans, (4) prepaid ambulatory  health  
plans, (5) primary care case management providers, (6) health insuring  organizations,                   
(7) programs for all-inclusive care for the elderly, and (8) other organizations that  have  
the structure of the managed care plan but are not described above.  For purposes of this  
report, we use the term MCO to describe all of the above.  
20 MCOs in Tennessee do  not  provide dental and drug benefits.  Kaiser Family  
Foundation, Tennessee, Comprehensive Medicaid Managed Care Organization Acute 
Care Benefit Carve-Outs, October 2010.  Accessed at   
http://www.statehealthfacts.org/profileind.jsp?ind=987&cat=4&rgn=44 on                        
October 9, 2012.   
21 TennCare, Managed Care Organizations.   Accessed at  http://www.tn.gov/tenncare/pro-
mcos.shtml on December 7, 2012. 

22  MFCU Statistical Data for FY 2011. Accessed at https://oig.hhs.gov/fraud/medicaid-
fraud-control-units-mfcu/  on November 14, 2012. 
 
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)   3   
   
statute, the Tennessee Unit is required to refer cases for prosecution to 
other State authorities with such authority.  The Tennessee Unit also refers 
cases for Federal prosecution to the three U.S. Attorneys Offices in 
Tennessee. 
The Tennessee Unit expended a total of $3.7 million in combined Federal 
and State funds for FY 2011.23  At the time of our review, the Unit 
employed 34 staff members including 1 director, 3 supervisors, 2 auditors, 
2 attorneys, 2 computer programmers, 1 statistical analyst, 4 support staff, 
and 19 investigators.  The Unit is located in the State capital of Nashville, 
and has regional offices in Jackson, Memphis, Chattanooga, Knoxville, 
Columbia, and Johnson City.  The Unit has policies and procedures for 
most operations, and often uses the TBI operations manual.  The Unit 
maintains an electronic system for case management and tracking, known 
as the Investigative Support Information System (ISIS).  Unit investigators 
prepare case information for Unit administrative staff who enter the 
information into ISIS.  The Unit director and supervisors use ISIS to 
review case files and run case status reports.  Unit case files contain 
opening and closing supervisory approvals, as well as documentation of 
supervisory reviews. 
METHODOLOGY 
Our review covered FYs 2009 through 2011.  We based our review on an 
analysis of data from seven sources:  (1) a review of policies, procedures, 
and documentation of the Units operations, staffing, and caseload; (2) a 
review of financial documentation; (3) structured interviews with key 
stakeholders; (4) a survey of Unit staff; (5) structured interviews with the 
Units director and supervisors; (6) an onsite review of case files that were  
open in FYs 2009 through 2011; and (7) an onsite review of Unit 
operations. We analyzed data from  all seven sources to describe the 
caseload; assess the performance of the Unit; identify any opportunities 
for improvement; and identify any instances in which the Unit did not 
fully meet the performance standards or was not operating in accordance 
with laws, regulations, and policy transmittals.24 We conducted the onsite 
review in August 2012. 
Data Collection and Analysis 
Unit Documentation Review.  We reviewed policies, procedures, and 
documentation of the Units operations, staffing, and cases, including its 
 
23 OIG analysis of Standard  Form 425 submitted by Tennessee MFCU  for FY 2011.  
24 All relevant  regulations, statutes, and  policy transmittals are available online at 
http://oig.hhs.gov. 
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)   4   
   
annual reports, quarterly statistical reports, and responses to recertification 
questionnaires.   
Review of Financial Documentation. We reviewed Unit financial 
practices to determine compliance with applicable laws and regulations 
and to determine the need for additional internal controls.  Prior to the 
onsite review, we reviewed the Units financial policies and procedures, 
its response to an internal control questionnaire, and MFCU grant-related 
documents such as financial status reports.  During the onsite review, we 
tested a sample of the Units purchase and travel transactions.  In addition, 
we reviewed a sample of time and effort records, vehicle records, and the 
equipment inventory.  
Stakeholder Interviews. We conducted structured interviews with key 
stakeholders who were familiar with the operations of the Unit.  
Specifically, we interviewed staff from the TennCare Department of Audit 
and Program Integrity, hereinafter referred to as the State Medicaid 
agency; the Attorney Generals Office, Medicaid Fraud and Integrity 
Division; the TBI Criminal Investigation Division; Adult Protective 
Services; the HHS OIG investigators who work with the Unit; the 
Assistant United States Attorneys;  and representatives from all four 
MCOs. These interviews focused on the Units interaction with external  
agencies.  
Unit Staff Survey.  We administered an electronic survey to Unit staff.  
Our questions focused on operations, opportunities for improvement, and 
effective practices. 
Unit Director, Supervisor, and Staff Interviews. We conducted structured 
interviews with the Unit director, three regional supervisors, two 
attorneys, and two auditors. We asked respondents to provide any 
additional information to better illustrate the Units operations, identify  
opportunities for improvement and effective practices, and clarify 
information we obtained from other data sources. 
Case File Review.  We selected a statistically valid, simple random sample 
of 100 case files from the 378 cases open at some point during                                
FYs 2009 through 2011.  We reviewed all 100 of these sampled case files 
for documentation of supervisory approval for the opening and closing of 
cases, periodic supervisory reviews, timeliness of case development, and 
the Units processes for monitoring the status and outcomes of cases.  
From these 100 case files, we selected a further random sample of 46 files 
for a more in-depth review of selected issues, such as the appropriateness 
and timeliness of investigations.   
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)   5   
   
Unit Operations Review.  We reviewed the Units operations during our 
onsite visit.  Specifically, we reviewed the process for receiving referrals, 
electronic case management, security of case files, and general functioning 
of the Unit.   
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency.   
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)   6   
   
FINDINGS 
For FYs 2009 through 2011, the Tennessee Unit 
obtained 96 criminal convictions and 22 civil 
settlements, and reported recoveries of $181 million 
For FYs 2009 through 2011, the Unit filed criminal charges against                      
111 defendants, obtained 96 criminal convictions, settled 22 civil cases, 
and was awarded more than $10 million in criminal recoveries and                      
$171 million in civil recoveries.  Provider fraud represented 63 percent of 
the Units open cases, patient abuse and neglect represented 31 percent, 
and theft of patient funds represented 6 percent.  The Units cases 
represented 30 different provider types; the most common were physicians 
and home health aides.   
The Unit obtained 96 criminal convictions and was awarded 
more than $10 million in criminal recoveries 
For FYs 2009 through 2011, the Unit filed criminal charges against                 
111 defendants and obtained 96 criminal convictions.  Over half 
(54 percent) of these convictions were fraud related, 30 percent involved 
patient abuse and neglect, and 16 percent involved theft of patient funds.  
Additionally, the Unit was awarded just over $10 million in criminal 
recoveries. See Table 1. 
Table 1: Unit Criminal Charges, Convictions, and Ordered Restitution,                      
FYs 20092011  
 
Criminal Investigations   Charges   Convictions  
 Fraud  58  52 
 Patient Abuse and Neglect  38  29 
Theft of Patient Funds  15  15 
 
     Total   111  96 
 
Criminal Restitution Ordered   $10,179,675  
 
Source:  OIG analysis of Unit  data and quarterly statistical reports, FYs 2009  through 2011, 2012  
The Unit obtained 22 civil settlements with more than                        
$171 million in civil recoveries  
The Unit obtained 22 civil settlements as a result of fraud investigations 
and global cases, resulting in more than $171 million in civil recoveries.25     
 
25 Global cases are civil false claims cases involving the Federal Department of Justice 
and other State MFCUs. 
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)   7   
   
Ninety-seven percent ($167 million) of these settlements were recoveries 
from global settlements.  See Table 2. 
Table 2: Unit Civil Recoveries, FYs 20092011  
Total  
FY 2009   FY 2010   FY 2011  
  Recoveries  
Global  $48,467,120   $67,626,155   $50,630,659   $166,723,934  
State Only    $2,327,933   $2,342,310   $0  $4,670,243 
     Total   $50,795,053   $69,968,465   $50,630,659   $171,394,177  
Source:  OIG analysis of Unit  data and quarterly statistical reports, FYs 2009  through 2011, 2012. 
The Unit investigated one case that, although related  
to an appropriate case, was not eligible under Federal 
regulations for Federal funding 
According to the Medicaid statute and Federal regulations, the Unit may 
receive FFP only for fraud investigations that involve allegations of fraud 
in the administration of the Medicaid program, in the provision of 
Medicaid services, or in the activities of Medicaid providers.26  Our review 
found that the Unit investigated a case that did not involve allegations 
about these activities and, therefore, costs associated with that 
investigation are not eligible for FFP.  At the time, the Unit director 
believed that the investigation was within the Units purview because it 
involved individuals and events related to a prior investigation and 
therefore Unit agents were best suited to investigate the related matter.  
The Unit referred all convicted health care providers 
to OIG for program exclusion, but did not refer 
nonprovider convictions  
According to Performance Standard 8, the Unit should refer convictions to 
OIG for purposes of program exclusion within 30 days or another 
reasonable period after provider sentencing.  The Unit referred all 
convicted health care providers (85 percent of all convictions) to OIG.  
However, the Unit did not refer to OIG convictions of nonproviders, such 
as owners of businesses or foster parents.  The Unit reported receiving 
verbal OIG guidance that only convicted health care providers should be 
referred to OIG, even though OIG requires that all convicted individuals 
and entities be considered for exclusion.27   
 
26 SSA    1903(q)(3) and  42 CFR   1007.11(a) and 1007.19(d). 

27 In addition to Performance Standard 8, SSA   1128(a) specifies that individuals and  

entities convicted  of program-related crimes, patient abuse, health care fraud, and 

felonies relating to controlled  substances must be excluded.  

Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)   8   
   
Of the convicted health care providers the Unit referred, nearly half                           
(48 percent) were referred within 30 days of sentencing; another                              
40 percent were referred within 90 days. The Unit referred the remaining                       
12 percent more than 91 days after sentencing.  One convicted health care 
provider was referred to OIG a full year after sentencing.   
Although the Unit had a training plan, it did not 
establish training-hour requirements for each 
professional discipline 
According to Performance Standard 12, the Unit should maintain an 
annual training plan for all professional disciplines, including a 
requirement for a minimum number of hours of training for each.  The 
Unit had a training plan and made funds available to staff for training.  
However, the training plan did not specify a minimum number of training 
hours for each professional discipline.  All staff reported that the Unit 
provided them with training opportunities and that the training they 
received aided the mission of the Unit.28    
Despite Unit efforts to increase referrals, the State 
Medicaid agency and MCOs sent a small number of 
fraud referrals to the Unit 
According to Performance Standard 4, the Unit should have a process to 
ensure adequate fraud referrals from the State Medicaid agency and other 
sources. The Unit made efforts to ensure referrals were made, such as 
updating its MOU with the State Medicaid agency and participating on 
task forces with the State Medicaid agency and MCOs.  However, the 
State Medicaid agency and MCOs were responsible for a small percentage 
of the Units total fraud referrals 12 percent and 6 percent, respectively.   
Most referrals of suspected fraud came from other sources, including 
private citizens (37 percent) and law  enforcement entities (14 percent).  
See Table 3. 
 
 
 
 
28 We recognize that attorneys, investigators, and auditors receive professional and law 
enforcement training, and that the lack of a requirement for a minimum number of hours 
of training does not necessarily  mean that professional staff are unqualified. 
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)   9   
   
Table 3: Fraud Referrals Received by  the Unit, FYs 20092011  
 
Source  Number   Percentage  
 
Private Citizens  122  36.5%  
 
Law Enforcement Entities  45  13.5%  
  State Medicaid Agency  40  12.0%  
Other (Includes HHS OIG, Provider Associations, Licensing Boards, 
38  11.4%  
Private Health Insurers, MFCU Hotline, and Ombudsman)  
 
State Agencies  28  8.4%  
 
Prosecutors  24  7.2%  
  MCOs   19  5.7%  
Providers  18  5.4% 
 
     Total   334  100.0%  
Source:  OIG analysis of Unit  data  collection instrument, 2012. 
The Unit made efforts to ensure the State Medicaid agency 
referred a greater number of fraud referrals  
The Unit and the State Medicaid agency reported attempting multiple 
processes to ensure a greater number of fraud referrals.  The first process, 
effective at the beginning of the review period through June 2010, 
involved the State Medicaid agency referring all fraud allegations to the 
Unit. The second process, effective July 2010 through February 2011, 
involved the State Medicaid agency making determinations regarding the 
merit of fraud allegations and sending to the Unit only cases that the 
agency deemed to warrant referral.29 The third and current process, 
similar to the first, involves the State Medicaid agency referring all fraud 
allegations to the Unit.  However, the current process also involves the 
State Medicaid agency conducting preliminary analysis on fraud 
allegations and meeting with the Unit to discuss referrals.30 The Unit and 
the State Medicaid agency attend monthly task force meetings, during 
 
29 In March 2012, the CMS Medicaid Integrity Group (MIG) reviewed the State Medicaid  
agency and  found that providing only vetted  criminal referrals to the Unit was not in  
alignment with Federal regulation  (42 CFR   455.21), which  requires State Medicaid  
agencies to refer all cases of suspected provider fraud.  MIG recommended that the State  
Medicaid agency develop and implement policies and procedures to  refer all suspected  
provider fraud  cases directly to the Unit.  CMS, MIG, Tennessee Comprehensive 
Program Integrity Review Final Report, March 2012.  Accessed at 
http://www.cms.gov/Medicare-Medicaid-Coordination/Fraud-
Prevention/FraudAbuseforProfs/Downloads/tnfy11comp.pdf  on August 15, 2012. 
30  This process was not  in effect during our review period but was in effect at the time of 
our onsite review.  
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)   10   
   
which the Unit may accept referrals; ask the State Medicaid agency to 
conduct more analysis; or decide, along with the State Medicaid agency, 
to close referrals.  The Unit and the State Medicaid agency updated their 
MOU, effective March 2012, to reflect this new referral process. 
Unit staff and stakeholders suggested that the small number 
of fraud referrals from MCOs could be attributed to financial 
disincentives 
Although MCOs oversaw the States Medicaid providers, they referred 
only 19 of the Units 334 fraud referrals (6 percent).  Unit staff and 
stakeholders reported that although MCOs are contractually required to 
report confirmed and suspected fraud, they have a financial disincentive to 
do so.31  MCOs are not required to refer billing errors to the State 
Medicaid agency or the Unit.  Stakeholders suggested that MCOs may 
label confirmed or suspected fraud as billing errors rather than as fraud 
because MCOs are not allowed to recoup any share of overpayments 
received from providers at the conclusion of an investigation.  
Unit staff and stakeholders cited involvement on 
various task forces as key to productivity  
Unit staff and stakeholders reported that the relationships formed through 
involvement on task forces, such as the Provider Fraud and Federal Health 
Care Fraud task forces, were key to the Units productivity.  The Attorney 
Generals Office formed the Provider Fraud Task Force in 2007 to 
coordinate stakeholders in combating Medicaid fraud through increased 
communication and collaboration. The Unit, the State Medicaid agency, 
and stakeholders such as the Tennessee Department of Human Services 
Adult Protective Services unit and other State agencies attended monthly 
meetings.  Additionally, at least one MCO was present at each meeting to  
discuss suspected fraud cases and all MCOs attended a quarterly meeting.  
During the task force meetings, stakeholders engaged in discussions about 
patterns of fraud and abuse, referrals, and case examples, and occasionally 
offered training. The Unit also participated in three Federal Health Care 
Fraud task forces in various parts of the State.  According to the Unit 
director, most of the Units fraud cases are prosecuted federally, making 
participation on these Federal task forces essential.    
 
31 Section 2.20.2 of TennCare MCO contracts requires MCOs to  report all confirmed or  
suspected  fraud and abuse to  TennCare, TennCare  Office of Program Integrity, TBI 
MFCU, and/or OIG.    
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)   11   
   
CONCLUSION AND RECOMMENDATIONS 
For FYs 2009 through 2011, the Tennessee Unit obtained 96 criminal 
convictions and 22 civil settlements and reported recoveries of                          
$181 million.  Unit staff and stakeholders reported that involvement on 
various task forces was key to the Units productivity.   
We identified one instance of noncompliance with applicable laws, 
regulations, and policy transmittals.  The Unit investigated a case that, 
although related to an appropriate case, was not eligible under Federal 
regulations for Federal funding.  With the exception of this instance, our 
review of compliance issues found no evidence of significant 
noncompliance with applicable laws, regulations, or policy transmittals.  
Additionally, we identified two instances in which the Unit did not fully 
meet Performance Standards.  The Unit referred all convicted health care 
providers to OIG for program exclusion, but did not refer nonprovider 
convictions. Finally, although the Unit had a training plan, it did not 
establish training-hour requirements for each professional discipline.   
To address the noncompliance issues and the opportunities for 
improvement identified by our review, we recommend that the Tennessee 
Unit: 
Repay Grant Funds Spent on the Case That Was Not Eligible 
Under Federal Regulations 
The Unit should work with OIG to identify the staff hours and 
expenditures associated with the ineligible case and repay the Federal 
grant funds. 
Refer All Convictions to OIG, Including Nonprovider 
Convictions, in a Timely Manner 
The Unit should refer all convictions, including nonprovider convictions, 
to OIG for purposes of program exclusion.  The Unit should improve its 
processes for referring convictions to OIG and refer convictions within                  
30 days from the date of sentencing. 
Establish Training-Hour Requirements for Professional 
Disciplines 
The Unit should revise its training plan to include a minimum number of 
training hours for each professional discipline.   
 
 
 
 
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)   12   
   
UNIT COMMENTS AND OFFICE OF INSPECTOR GENERAL  
RESPONSE 
The Unit concurred with all but the first of our three recommendations. 
Regarding our second recommendation, the Unit stated that it now refers 
nonprovider convictions in a timely manner to OIG for purposes of 
program exclusion.  The Unit stated that it had been operating under 
instruction from OIG that it was not necessary to refer nonprovider 
convictions to OIG.  The Units concurrence is consistent with 
performance standard 8, which states that a MFCU should provide 
reports of convictions to OIG within 30 days or other reasonable time  
period, and does not limit such convictions to those involving health care 
providers. OIGs exclusion authority, contained in section 1128 of the 
SSA, is similarly not limited to health care providers.  Nonproviders, 
especially for patient abuse cases, may be subject to conviction and should 
be referred to OIG for potential program exclusion.   
Regarding our third recommendation, the Unit stated that it modified its 
training plan to include a minimum number of training hours for each 
professional discipline. 
The Unit did not concur with our first recommendation to repay grant 
funds spent investigating the case that, under Federal regulations, was not 
eligible for Federal funding. The Unit stated that it felt that the case in 
question was an extension of an existing investigation, that the case was 
within its purview, and that the Unit was justified in conducting the 
investigation.  While we agree that the case was an extension of an 
authorized investigation, OIG has no authority to reimburse a Unit for the  
investigation of cases that do not involve either health care fraud or patient 
abuse or neglect. The Unit should work with OIG to determine the 
amount of ineligible costs relating to the time spent on the case.  
The full text of the Units comments is provided in Appendix B.  We did 
not make any changes to the report based on the Units comments.  
     
 
 
 
 
 
 
 
 
 
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)   13   
   
APPENDIX A 
Performance Standards for Medicaid Fraud Control Units 
[59 Fed. Reg. 49080, Sept. 26, 1994] 
1. 	A Unit will be in conformance with all applicable statutes, 
regulations and policy transmittals.  In meeting this standard, the 
Unit must meet, but is not limited to, the following requirements:  
a. 	  The Unit professional staff must consist of permanent employees 
working full-time on Medicaid fraud and patient abuse matters. 
b. 	  The Unit must be separate and distinct from the single State 
Medicaid agency. 
c. 	  The Unit must have prosecutorial authority or an approved formal 
procedure for referring cases to a prosecutor. 
d. 	  The Unit must submit annual reports, with appropriate 

certifications, on a timely basis. 
 
e. 	  The Unit must submit quarterly reports on a timely basis. 
f. 	  The Unit must comply with the Americans with Disabilities Act, 
the Equal Employment opportunity requirements, the Drug Free 
workplace requirements, Federal lobbying restrictions, and other 
such rules that are made conditions of the grant. 
2. 	A Unit should maintain staff levels in accordance with staffing 
allocations approved in its budget. In meeting this standard, the 
following performance indicators will be considered: 
a. 	  Does the Unit employ the number of staff that was included in the 
Unit's budget as approved by the OIG? 
b. 	  Does the Unit employ the number of attorneys, auditors, and 
investigators that were approved in the Unit's budget? 
c. 	  Does the Unit employ a reasonable size of professional staff in 
relation to the State's total Medicaid program expenditures?   
d. 	  Are the Unit office locations established on a rational basis and are 
such locations appropriately staffed? 
3. 	A Unit should establish policies and procedures for its operations, 
and maintain appropriate systems for case management and case 
tracking.  In meeting this standard, the following performance 
indicators will be considered: 
a. 	  Does the Unit have policy and procedure manuals? 
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)   14   
   
b. 	  Is an adequate, computerized case management and tracking 
system in place? 
4. 	A Unit should take steps to ensure that it maintains an adequate 
workload through referrals from the single State agency and other 
sources.  In meeting this standard, the following performance 
indicators will be considered:  
a. 	  Does the Unit work with the single State Medicaid agency to 
ensure adequate fraud referrals? 
b. 	  Does the Unit work with other agencies to encourage fraud 

referrals? 

c. 	  Does the Unit generate any of its own fraud cases? 
d. 	  Does the Unit ensure that adequate referrals of patient abuse 
complaints are received from all sources? 
5. 	A Units case mix, when possibl e, should cover all significant 
provider types. In meeting this standard, the following performance 
indicators will be considered:  
a. 	  Does the Unit seek to have a mix of cases among all types of 
providers in the State? 
b. 	  Does the Unit seek to have a mix of Medicaid fraud and Medicaid 
patient abuse cases? 
c. 	  Does the Unit seek to have a mix of cases that reflect the 

proportion of Medicaid expenditures for particular provider 

groups? 

d. 	  Are there any special Unit initiatives targeting specific provider 
types that affect case mix? 
e. 	  Does the Unit consider civil and administrative remedies when  
appropriate? 
6. 	A Unit should have a continuous case flow, and cases should be 
completed in a reasonable time. In meeting this standard, the 
following performance indicators will be considered:  
a. 	  Is each stage of an investigation and prosecution completed in an 
appropriate time frame?  
b. 	  Are supervisors approving the opening and closing of 

investigations?
   
c. 	  Are supervisory reviews conducted periodically and noted in the 
case file? 
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)   15   
   
7. A Unit should have a process for monitoring the outcome of cases.  
In meeting this standard, the following performance indicators will be 
considered:  
a. 	  The number, age, and type of cases in inventory. 
b. 	  The number of referrals to other agencies for prosecution. 
c. 	  The number of arrests and indictments. 
d. 	  The number of convictions. 
e. 	  The amount of overpayments identified. 
f. 	  The amount of fines and restitution ordered. 
g. 	  The amount of civil recoveries. 
h. 	  The numbers of administrative sanctions imposed. 
8. 	A Unit will cooperate with the OIG and other Federal agencies, 
whenever appropriate and consistent with its mission, in the 
investigation and prosecution of health care fraud.  In meeting this 
standard, the following performance indicators will be considered: 
a. 	  Does the Unit communicate effectively with the OIG and other 
Federal agencies in investigating or prosecuting health care fraud 
in their State? 
b. 	  Does the Unit provide OIG regional management, and other 
Federal agencies, where appropriate, with timely information 
concerning significant actions in all cases being pursued by the 
Unit? 
c. 	  Does the Unit have an effective procedure for referring cases,  
when appropriate, to Federal agencies for investigation and other 
action?  
d. 	  Does the Unit transmit to the OIG, for purposes of program  
exclusions under section 1128 of the Social Security Act, reports 
of convictions, and copies of Judgment and Sentence or other 
acceptable documentation within 30 days or other reasonable time 
period? 
9. 	A Unit should make statutor y or programmatic recommendations, 
when necessary, to the State government. In meeting this standard, 
the following performance indicators will be considered:  
a. 	  Does the Unit recommend amendments to the enforcement 
provisions of the State's statutes when necessary and appropriate to 
do so? 
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)   16   
   
b. 	  Does the Unit provide program recommendations to single State 
agency when appropriate? 
c. 	  Does the Unit monitor actions taken by State legislature or State 
Medicaid agency in response to recommendations? 
10. 	A Unit should periodica lly review its memorandum of 
understanding (MOU) with the single State Medicaid agency and 
seek amendments, as necessary, to ensure it reflects current law  
and practice.  In meeting this standard, the following performance 
indicators will be considered:  
a. 	  Is the MOU more than 5 years old? 
b.	   Does the MOU meet Federal legal requirements? 
c. 	  Does the MOU address cross-training with the fraud detection staff  
of the State Medicaid agency? 
d.	   Does the MOU address the Units responsibility to make program  
recommendations to the Medicaid agency and monitor actions  
taken by the Medicaid agency concerning those recommendations? 
11. 	The Unit director should exercise proper fiscal control over the 
Unit resources.  In meeting this standard, the following performance 
indicators will be considered:  
a. 	  Does the Unit director receive on a timely basis copies of all fiscal 
and administrative reports concerning Unit expenditures from the 
State parent agency? 
b.	   Does the Unit maintain an equipment inventory?  
c. 	  Does the Unit apply generally accepted accounting principles in its 
control of Unit funding? 
12. 	A Unit should maintain an annual training plan for all 
professional disciplines.  In meeting this standard, the following 
performance indicators will be considered:  
a. 	  Does the Unit have a training plan in place and funds available to 
fully implement the plan? 
b. 	  Does the Unit have a minimum number of hours training 
requirement for each professional discipline, and does the staff 
comply with the requirement? 
c. 	  Are continuing education standards met for professional staff?   
d. 	  Does the training undertaken by staff aid to the mission of the 
Unit?   
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)   17   
   
APPENDIX B 
Unit Comments 
 
 
 
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)  18  We concur with this recommendation, but would like to include we had been operating under 
instruction from HHS-OIG that it was not necessary to report non-provider convictions. In 
accordance with your recommendation, we are now including non-provider convictions to OIG 
for purposes ofprogram exclusion, in a timely manner. 
Although the Unit bad a t.-aining plan, it did not establish tnining-hou.-.-equi.-ements fo.
each professional discipline. 
We concur with this recommendation and have already modified our training plan to include a 
minimum number oftraining hours for each professional discipline. 
I appreciate the opportunity to respond to this report, and I am available to answer any questions 
you may have. Please feel free to contact me or Special Agent in Charge Norman Tidwell at 
615-744-4322 if you need additional information. 
Sincerely 
Mark Gwyn 
Director 
MRG/nt 
xc: 	 Deputy Director Jeff Puckett 
SAC Norman Tidwell 
Page 2 of 2 
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review (OEI-06-12-00370)  19   
   
ACKNOWLEDGMENTS 
This report was prepared under the direction of Kevin Golladay, Regional 
Inspector General for Evaluation and Inspections in the Dallas regional 
office; Blaine Collins, Deputy Regional Inspector General; and                           
Ruth Ann Dorrill, Deputy Regional Inspector General.    
Lyndsay Patty served as the Team Leader for this study.  Other Office of 
Evaluation and Inspections staff who conducted the study include          
Ben Gaddis. Office of Investigations staff who provided support include 
Ryan Houston and Jason Weinstock.  Central office staff who provided 
support include Susan Burbach, Kevin Farber, Debra Roush, and 
Richard Stern.   
 
Tennessee State Medicaid Fraud Control Unit:  2012 Onsite Review  (OEI-06-12-00370)   20   
Office  of Inspector General 
 
http://oig.hhs.gov  
 
The mission  of  the Office of Inspector General  (OIG), as mandated by  Public Law  95-452,  as  
amended, is  to protect the integrity of the Department of  Health and  Human Services  
(HHS)  programs, as well as the health  and  welfare of beneficiaries served by those  
programs.  This  statutory mission is carried out through a nationwide  network of  audits,  
investigations, and inspections conducted  by the  following  operating components:  
Office of  Audit  Services  
The Office of  Audit Services (OAS) provides auditing services  for  HHS, either by conducting  
audits with its own audit  resources or  by overseeing audit work done by  others.  Audits  
examine the performance of  HHS programs  and/or  its grantees and contractors in carrying 
out their respective responsibilities and are intended to provide independent assessments of  
HHS programs  and operations.  These assessments help reduce waste,  abuse, and  
mismanagement and promote economy  and efficiency throughout  HHS.  
Office of  Evaluation  and  Inspections  
The  Office  of Evaluation and  Inspections (OEI)  conducts national evaluations to  provide  
HHS, Congress, and  the  public with  timely,  useful, and reliable information on  significant  
issues.  These evaluations focus  on preventing fraud, waste, or abuse and promoting  
economy,  efficiency, and effectiveness of departmental programs.  To promote impact,  OEI  
reports  also present practical recommendations for  improving program operations.   
Office of  Investigations  
The  Office of Investigations  (OI) conducts criminal, civil, and administrative investigations  
of fraud  and  misconduct related  to HHS programs,  operations, and beneficiaries.   With  
investigators working in  all 50  States and  the District of Columbia, OI utilizes its resources  
by actively  coordinating  with  the Department of  Justice and other Federal,  State,  and local  
law enforcement authorities.  The investigative efforts  of  OI often lead  to criminal  
convictions, administrative sanctions, and/or civil  monetary penalties.  
Office  of  Counsel  to  the Inspector  General  
The Office of  Counsel  to the Inspector  General  (OCIG) provides general legal services  to 
OIG, rendering advice  and opinions on  HHS programs and operations  and providing all  
legal support  for  OIGs internal operations.  OCIG  represents OIG in  all civil and  
administrative  fraud and  abuse cases involving  HHS programs, including False Claims Act,  
program exclusion, and civil monetary penalty cases.  In connection  with  these cases,  OCIG  
also negotiates and monitors corporate integrity agreements.   OCIG renders advisory  
opinions, issues compliance program guidance, publishes fraud  alerts,  and provides other  
guidance  to  the health care industry concerning  the anti-kickback  statute and other OIG  
enforcement authorities.