Department of Health and Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
C   S M
ALIFORNIA  TATE  EDICAID 
 
F C U :  
  RAUD  ONTROL  NIT  
  2015 ONSITE REVIEW 
 
 
 
 
 
 
 
Suzanne Murrin 
Deputy Inspector General for 
Evaluation and Inspections 
 
February 2016 
OEI-09-15-00070 
 
   
   
CALIFORNIA STATE MEDICAID FRAUD CONTROL UNIT:  
2015 ONSITE REVIEW 
OEI-09-15-00070 
WHY WE DID THIS STUDY  
The Office of Inspector General (OIG) oversees all State Medicaid Fraud Control Units 
(MFCUs or Units).  As part of this oversight, OIG conducts periodic reviews of all Units 
and prepares public reports based on these reviews.  The reviews assess Unit performance 
in accordance with the 12 MFCU performance standards and monitor Unit compliance 
with Federal grant requirements.   
HOW WE DID THIS STUDY 
We conducted an onsite review of the California Unit in February 2015.  We analyzed 
data from seven sources:  (1) a review of any documentation related to the Units policies 
and procedures, operations, staffing, and Federal fiscal years (FYs) 2012-2014 caseload, 
(2) a review of financial documentation for FYs 2012-2014; (3) structured interviews 
with key stakeholders; (4) a survey of Unit staff; (5) structured interviews with the Units 
management and selected staff; (6) an onsite review of a sample of case files associated 
with cases that were open at any point during FYs 2012-2014; and (7) an onsite review of 
Unit operations. 
WHAT WE FOUND 
During FYs 2012-2014, the Unit expended $83 million and generated 337 convictions, 
67 civil judgments and settlements, and total recoveries of $795 million, $531 million of 
which was attributed to cases investigated directly by the Unit.  Our review of the Unit 
found that it was generally in compliance with applicable laws, regulations, and policy 
transmittals.  However, we identified some aspects of Unit operations that should be 
improved.  Specifically, some Unit case files lacked certain required documentation, the 
Unit lacked a training plan for its investigators and auditors, and the Unit did not report 
most adverse actions or convictions in appropriate timeframes.  Although the Unit 
generally exercised proper fiscal control of its resources, it improperly claimed some 
indirect costs during FYs 2012-2014.  We noted three practices, among others, that the 
Unit reported were beneficial to Unit operations.  Specifically, the Unit:  (1) took steps to 
ensure it received fraud referrals from managed care organizations, (2) used a field 
representative to conduct outreach and provide training, and (3) co-located Unit 
investigators in an OIG field office. 
WHAT WE RECOMMEND 
We recommend that the California Unit:  (1) develop and implement procedures to 
ensure that the Unit documents relevant information in its case files, (2) fully implement 
the new training plans for investigators and auditors, (3) develop and implement 
procedures to overcome challenges in obtaining information needed to report convictions 
and adverse actions to Federal partners within required timeframes, and (4) develop and 
implement procedures to ensure that the Unit properly claims its indirect costs.  The Unit 
concurred with all four of our recommendations. 
 
   
   
TABLE OF CONTENTS 
Objective ......................................................................................................1 
Background ..................................................................................................1 
Methodology ................................................................................................4 
Findings........................................................................................................6 
From FY 2012 through FY 2014, the Unit reported recoveries      
of almost $800 million, 337 convictions, and 67 civil       
judgments and settlements ...............................................................6 
Some Unit case files lacked certain required documentation ............7 
The Unit lacked a training plan for its investigators and auditors ...9 
Although the Unit reported all adverse actions to the National 
Practitioner Data Bank (NPDB) and convictions to OIG, it did    
not report most within appropriate timeframes ................................9 
The Unit generally exercised proper fiscal control of its   
resources; however, it improperly claimed some indirect costs .... 11 
Other observations ......................................................................... 11 
The Unit took steps to ensure that MCOs refer fraud 
allegations to the Unit ............................................................. 11 
The Unit used a field representative to conduct outreach     
and provide training ................................................................12 
Unit management and OIG reported that colocation of       
staff promoted cooperation between the agencies ..................12 
Conclusion and Recommendations ............................................................14 
Unit Comments and Office of Inspector General Response ..........16 
Appendixes ................................................................................................17 
A:  2012 Performance Standards ...................................................17 
B:  Referrals of Provider Fraud and Patient Abuse and Neglect     
to the California MFCU by Source, FYs 2012 through 2014 ........21 
C:  Investigations Opened and Closed by the California MFCU,   
by Provider Category and Case Type, FYs 2012 through 2014 .....22 
D:  Methodology ............................................................................24 
E:  Point Estimates and 95-Percent Confidence Intervals Based    
on Reviews of Case Files ...............................................................28 
F:  Unit Comments .........................................................................29 
Acknowledgments......................................................................................34 
 
   
 
OBJECTIVE 
To conduct an onsite review of the California State Medicaid Fraud 
Control Unit (MFCU or Unit). 
BACKGROUND 
The mission of State MFCUs, as established by Federal statute, is to 
investigate and prosecute Medicaid provider fraud and patient abuse and 
neglect under State law.1  Pursuant to Title XIX of the SSA, 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) 2014, combined Federal and State grant expenditures for the 
Units totaled $235 million.4, 5  That year, the 50 Units employed 
1,958 individuals.6 
To carry out its duties in an effective and efficient manner, each MFCU 
must employ an interdisciplinary staff that consists of at least an 
investigator, an auditor, and an attorney.7  The staff reviews complaints 
referred by the State Medicaid agency (Medicaid agency) and other 
sources and determines their potential for criminal prosecution and/or civil 
action.  In FY 2014, the 50 Units reported a collective 1,318 convictions 
 
1 Social Security Act (SSA)  1903(q).  Regulations at 42 CFR  1007.11(b)(1) add that 
the MFCUs responsibilities may include reviewing complaints of misappropriation of 
patients private funds in residential health care facilities.   
2 SSA  1902(a)(61).   
3 North Dakota and the territories of American Samoa, Guam, the Northern Mariana 
Islands, Puerto Rico, and the U.S. Virgin Islands have not established MFCUs.  Medicaid 
Fraud Control Units, Office of Inspector General (OIG) web site.  Accessed at 
http://oig.hhs.gov/fraud/medicaid-fraud-control-units-mfcu/index.asp on April 7, 2015. 
4 All FY references in this report are based on the Federal FY (October 1 through 
September 30). 
5 OIG, MFCU Statistical Data for Fiscal Year 2014.  Accessed at 
http://oig.hhs.gov/fraud/medicaid-fraud-control-units-
mfcu/expenditures_statistics/fy2014-statistical-chart.htm on April 7, 2015. 
6 Ibid. 
7 SSA  1903(q)(6) and 42 CFR  1007.13. 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  1 
   
   
and 874 civil judgments and settlements.  That year, the Units reported 
recoveries of approximately $2 billion.8 
MFCUs are required to have either Statewide authority to prosecute cases 
or formal procedures to refer suspected criminal violations to an office 
with such authority.9  In California and 43 other States, the Units are 
located within offices of State Attorneys General that have this authority.  
In the remaining six States, the Units are located within other State 
agencies; generally, such Units must refer cases to offices with 
prosecutorial authority.10, 11  Additionally, each Unit must be a single, 
identifiable entity of State government, distinct from the Medicaid agency, 
and each Unit must develop a formal agreementi.e., a memorandum of 
understanding (MOU)that describes the Units relationship with that 
agency.12  
Oversight of the MFCU Program 
The Secretary of HHS delegated to OIG the authority both to annually 
certify the Units and to administer grant awards to reimburse States for a 
percentage of their costs of operating them.13  All Units are currently funded 
by the Federal Government on a 75-percent matching basis, with the States 
contributing the remaining 25 percent.14  To receive Federal reimbursement, 
each Unit must submit an initial application to OIG.15  OIG reviews the 
application and notifies the Unit whether it is approved and the Unit is 
 
8 OIG, MFCU Statistical Data for Fiscal Year 2014.  Accessed at 
http://oig.hhs.gov/fraud/medicaid-fraud-control-units-
mfcu/expenditures_statistics/fy2014-statistical-chart.htm on April 7, 2015.  Pursuant to 
42 CFR  1007.17, Units report the total amount of recovered funds in their annual 
reports to OIG.  Recoveries are defined as the amount of money that defendants are 
required to pay as a result of a judgment or settlement in criminal and civil cases, and 
may not reflect actual collections.  Recoveries may involve cases that include 
participation by other State and Federal agencies. 
9 SSA  1903(q)(1). 
10 Medicaid Fraud Control Units, OIG web site.  Accessed at 
http://oig.hhs.gov/fraud/medicaid-fraud-control-units-mfcu/index.asp on April 7, 2015. 
11 In States with a Unit, the Unit shares responsibility for protecting the integrity of the 
Medicaid program with the section of the Medicaid agency that functions as the Program 
Integrity Unit.  Some States also employ a Medicaid Inspector General who conducts and 
coordinates efforts to combat fraud, waste, and abuse for the State agency. 
12 SSA  1903(q)(2) and 42 CFR  1007.5 and 1007.9(d). 
13 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 referred to as 
Federal Financial Participation (FFP). 
14 SSA  1903(a)(6)(B).  
15 42 CFR  1007.15(a). 
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  2 
   
   
certified.  Approval and certification are valid for a 1-year period; the Unit 
must be recertified each year thereafter.16   
Pursuant to Title XIX of the SSA, States must operate Units that effectively 
carry out their statutory functions and meet program requirements.17  OIG 
developed and issued 12 performance standards to define the criteria that 
OIG applies in assessing whether a Unit is effectively carrying out statutory 
functions and meeting program requirements.18  Examples of standards 
include maintaining an adequate caseload through referrals from several 
sources, maintaining an annual training plan for all three of the professional 
disciplines (i.e., for auditors, investigators, and attorneys), and establishing 
policy and procedures manuals to reflect the Units operations.  See 
Appendix A for a description of each of the 12 performance standards.19   
California MFCU  
The Units headquarters office and a regional office are located in 
Sacramento.  The Unit also has regional offices in Burbank, Laguna 
Woods, San Diego, and West Covina.  The Unit is an autonomous entity 
within the California Office of the Attorney General with the authority to 
prosecute cases of Medicaid fraud and cases of patient abuse and neglect.20  
At the time of our review, the Unit director served as the interim chief 
attorney and directly supervised all regional attorney supervisors, the chief 
investigator, the chief civil auditor and the chief administrative officer.  
The chief investigator directly supervised all regional investigator 
supervisors and the chief criminal auditor.21  The chief civil auditor acted 
as chief of both the Units data mining team and the Case Intake and 
Development (CID) unit.   
The Unit receives referrals of provider fraud primarily from the California 
Medicaid agencythe Department of Health Care Services (DHCS).  The 
Unit also receives referrals of provider fraud from private citizens.  The 
Unit receives referrals of patient abuse and neglect from the Long-term 
 
16 42 CFR  1007.15(b) and (c). 
17 SSA  1902(a)(61). 
18 59 Fed. Reg. 49080 (Sept. 26, 1994).  Accessed at http://oig.hhs.gov on April 7, 2015.   
19 In June 2012, OIG published a revision of the original 1994 performance standards   
(77 Fed. Reg. 32645, June 1, 2012).  The performance standards referred to in this report 
are the revised standards published in 2012, which were in effect during FYs 2012-2014.  
Our onsite data collection took place in February 2015.  When referring to the 
performance standards, we refer to the 2012 standards, unless otherwise noted.  Full text 
of the 1994 standards is available online at http://oig.hhs.gov/fraud/medicaid-fraud-
control-units-mfcu/files/Performance%20Standards.pdf. 
20 For the purposes of this report, the misappropriation or theft of residential health care 
facility patients private funds is included in the category of patient abuse and neglect. 
21 The Unit director retired in August 2015, after our onsite review.  At the time of this 
reports publication, the Units chief investigator was serving as the interim Unit director. 
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  3 
   
   
Care Ombudsmans Office, the State Survey and Certification agency, and 
private citizens.   
The CID unit processes all referrals of fraud or abuse and neglect.  
According to Unit management and staff, CID staff evaluate all referrals 
for substance and to determine whether the allegation is within the Units 
grant authority.  CID staff enter the details of all accepted referrals into the 
Units electronic case file tracking system and forward the accepted 
criminal and civil fraud referrals to the CID chief for approval.  CID staff 
forward all accepted patient abuse and neglect referrals to regional 
investigation managers for approval.  After a referral is approved, the Unit 
opens the referral as a case.  Unit management reported that, in some 
instances, the Unit may place the case on a regional backlog list until an 
investigator is available to conduct a full investigation.  After the Unit 
completes the full investigation, a regional attorney supervisor determines 
whether to prosecute the case or close it.   
The Unit may open a case and pursue it through criminal investigation and 
prosecution, civil action, or a combination of the two.  The Unit may close 
a case for various reasons, including, but not limited to, resolving it 
through criminal and/or civil action or referring it to another agency.   
Previous Review 
OIG conducted the last onsite review of the California Unit in 2008.  The 
review found that the Unit did not routinely document the progress of 
MFCU cases using interim investigative memorandums.  OIG noted that 
inclusion of interim investigative memorandums in the Units case files 
could enable a Unit to ensure continuous case flow.  In response, the Unit 
stated that it implemented a policy requiring that active cases be the 
subject of progress reviews at least every 3 months.  Our 2015 onsite 
review found no evidence of a failure to document the progress of 
investigations.   
METHODOLOGY 
We conducted an onsite review of the California Unit in February 2015.  
We analyzed data from seven sources:  (1) a review of any documentation 
related to the Units policies and procedures, operations, staffing, and 
FYs 2012-2014 caseload; (2) a review of financial documentation for 
FYs 2012-2014; (3) structured interviews with key stakeholders; (4) a 
survey of Unit staff; (5) structured interviews with the Units management 
and selected staff; (6) an onsite review of a sample of case files associated 
with cases that were open at any point during FYs 2012-2014; and (7) an 
onsite review of Unit operations.  Appendix D contains a detailed 
methodology.  Appendix E contains the point estimates and 95-percent 
confidence intervals for the statistics in this report. 
 
 
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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.22 
 
22 Full text of these standards is available online at 
http://www.ignet.gov/pande/standards/oeistds11.pdf 
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  5 
   
   
FINDINGS 
From FY 2012 through FY 2014, the Unit reported 
recoveries of almost $800 million, 337 convictions, 
and 67 civil judgments and settlements  
During FYs 2012-2014, the Unit reported total criminal and civil 
recoveries of $795 millionan annual combined average of $265 million 
(see Table 1).23  Of the $795 million in total recoveries, $264 million were 
from global cases, which are civil False Claims Act cases that are 
brought by the U.S. Department of Justice and involve a group of State 
MFCUs.24, 25  Of the $531 million in recoveries from non-global cases, 
$398 million was from civil cases and $133 million was from criminal 
cases.  During this period, the Unit expended $83 million (State and 
Federal share); the Units annual average expenditures for this period were 
$28 million.  The Units total recoveries were significantly higher in 
FY 2012 than in FYs 2013 or 2014.26 
Table 1:  California MFCU Reported Recoveries and Total Expenditures, by 
Year, FYs 2012 through 2014* 
Annual 
  FY 2012  FY 2013  FY 2014  3-Year Total 
Average 
Criminal 
$44,926,431  $55,059,439  $33,224,470  $133,210,340  $44,403,447 
Recoveries 
Global Civil 
$122,709,283  $25,363,893  $115,877,872  $263,951,048  $87,983,683 
Recoveries 
Non-global Civil 
$342,424,940  $6,465,553  $48,568,782  $397,459,275  $132,486,425 
Recoveries 
Total Civil and 
Criminal  $510,060,654  $86,888,885  $197,671,124   $794,620,663  $264,873,555 
Recoveries 
Total Expenditures  $26,933,544  $30,069,750  $25,817,174  $82,820,468  $27,606,823 
    
Source:  OIG review of MFCU self-reported quarterly statistical reports and other data, FYs 2012-2014. 
 
   
 
23 Figures in this paragraph and Table 1 are rounded. 
24 The National Association of Medicaid Fraud Control Units facilitates the settlement of 
global cases on behalf of the States.  However, we note that the California Unit was one 
of the Units that directly participated in global cases.      
25 Global cases accounted for 482 of the Units 4,602 cases over the 3-year period. 
26 The Unit reported that this difference reflected a civil case resolved in FY 2012 that 
produced a significant recovery. 
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  6 
   
   
During FYs 2012-2014, the Unit reported 337 convictions and 67 civil 
judgments and settlements (see Table 2).    
 
Table 2:  California MFCU Convictions and Civil Judgments and 
Settlements, FYs 2012 through 2014 
3-Year 
  FY 2012  FY 2013  FY 2014 
Total 
Total Convictions  122  100  115  337 
Total Civil Judgments and 
28  19  20  67 
Settlements 
Source:  OIG review of MFCU self-reported quarterly statistical reports and other data, FYs 2012-2014. 
During FYs 2012-2014, the Unit opened an average of 877 cases annually, 
including an average of 346 cases of provider fraud and 531 cases of 
patient abuse and neglect.27  During this time, the Unit closed an average 
of 839 cases annually, including an average of 333 cases of provider fraud 
and 506 cases of patient abuse and neglect.28, 29  During FYs 2012-2014, 
the Unit received an average of 3,584 referrals annually, with an average 
of 495 referrals of provider fraud and 3,090 referrals of patient abuse and 
neglect.30 
Some Unit case files lacked certain required 
documentation 
To ensure that a Unit maintains a continuous case flow and maintains case 
files in an effective manner, Unit supervisors are expected to approve the 
opening and closing of cases and conduct periodic reviews of case files.  
However, our reviews revealed that some of the Units case files lacked 
documentation regarding:  (1) supervisory approval to open and close 
cases, (2) periodic supervisory reviews, and (3) relevant facts and 
information to explain investigative delays.31  Unit management reported 
that supervisors always approve the opening and closing of cases and 
conduct periodic reviews of case files in accordance with Unit policy, but 
 
27 The averages in this paragraph are rounded. 
28 Closures include multiple cases opened before FY 2012.   
29 For additional information on the Units opened and closed investigations, including a 
breakdown by case type and provider category, see Appendix C. 
30 For additional information on Unit referrals, see Appendix B. 
31 For the purposes of our case file review, we examined existing documentation in both 
the case files and case file tracking system.  We considered both of these sources to be 
part of the case file.  For the purpose of assessing whether supervisors noted their 
approval to open, close, or review a case, we considered a supervisors signature or 
notation in the Units paper case files or case file tracking system to be sufficient.  We 
also used both of these sources to determine whether the case files contained 
documentation of relevant facts or information to explain investigative delays.   
 
 
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acknowledged that these approvals and reviews were not always 
documented in the case files. 
Forty percent of the Units case files lacked documentation of 
supervisory approval to open the cases; 8 percent of the closed 
Unit cases lacked documentation of supervisory approval to 
close the cases 
Performance Standard 5(b) states that supervisors should approve the 
opening and closing of all cases.  In addition, according to Unit policy, 
supervisory approval to open and close investigations should be noted in 
the Units electronic case file tracking system.  However, 40 percent of 
Unit case files lacked documentation of supervisory approval to open the 
cases; 8 percent lacked documentation of approval to close the cases.32  
Twenty-six percent of Unit case files open for at least 
6 months lacked documentation of periodic supervisory 
reviews 
Performance Standard 7(a) states that supervisors should review Unit 
cases periodically and note their reviews in the case files.33  However, 
among Unit cases that were open for at least 6 months, 26 percent of the 
case files lacked documentation of such reviews.34  It was not possible to 
determine whether this was primarily a documentation deficiency or rather 
that supervisors were not meeting with agents periodically to discuss and 
review their cases.  In interviews, Unit supervisors and staff reported that 
the Unit director and chief investigator made quarterly visits to field 
offices to review cases.    
Twelve percent of Unit case files had unexplained delays of a 
year or more during the cases investigation phase 
During our case file review and interviews with Unit staff, we determined 
that 12 percent of the Units cases open for more than 1 year had 
investigation delays of a year or more with no documentation of relevant 
facts or information in the case files to explain the delays.  Performance 
Standard 5 states that the MFCU should complete cases in an appropriate 
timeframe based on the complexity of the cases.  Performance Standard 
5(c) states that investigation and prosecution delays should be limited to 
 
32 The lack of this documentation does not necessarily indicate that supervisors did not 
approve the opening or closing of these cases. 
33 For the purposes of this report, supervisory approval to open and close a case does not 
constitute a periodic supervisory review.  Periodic supervisory reviews are demonstrated 
by a supervisors reviewing a case more than once between the cases opening and 
closing and documenting those reviews in the case file. 
34 We reviewed the files of 62 cases that were open for at least 6 months for 
documentation of supervisory reviews. 
 
 
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situations imposed by resource constraints or other exigencies.  In 
addition, Performance Standard 7(b) states that case files should contain 
all relevant facts and information.  Unit management and stakeholders 
reported that a lack of investigators delayed investigations and forced the 
Unit to place many relatively low-priority cases on the Units backlog 
list.  For example, the Unit was approved for 205 staff, but only 
185 positions were filled.  Although the Unit had 74 investigator positions, 
13 of these were unfilled.35  However, the case files did not contain 
documentation of relevant facts and information to explain that a lack of 
investigators, or any other factor, caused investigation delays for these 
cases.36 
The Unit lacked a training plan for its investigators and 
auditors 
Although the Unit had a training plan in place for its attorneys, it did not 
have a training plan in place for its investigators and auditors until the 
time of our onsite review.37  Performance Standard 12(a) states that a Unit 
should have a training plan that includes an annual number of required 
training hours for each professional discipline.  Although the Unit lacked a 
training plan for its investigators and auditors, Unit management 
documented that it provided some relevant, job-specific training to all Unit 
professional staff in FYs 2012-2014.  For example, the Unit had staff with 
specialized subject matter knowledge provide in-house training to other 
Unit staff.  The Unit also required staff to take training necessary to 
maintain professional credentials. 
Although the Unit reported all adverse actions to the 
National Practitioner Data Bank (NPDB) and 
convictions to OIG, it did not report most within 
appropriate timeframes 
Although the Unit reported 283 adverse actions to the National 
Practitioner Data Bank (NPDB) during FYs 2012-2014, the Unit reported 
224 (79 percent) of these more than 90 days after the final adverse action 
 
35 Unit management reported that they are trying to hire more investigators, but, because 
the salary scale for Unit investigators is relatively low, it is difficult to attract good 
candidates. 
36 For the purpose of this report, we defined a delay as a period of at least a year with 
no documented activity. 
37 The Unit implemented a training plan for its investigators in January 2015, a few 
weeks before our onsite review, and a training plan for auditors during the week of our 
onsite review in February 2015. 
 
 
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was taken.38  According to Federal regulations, all State and Federal 
government agencies must report any final adverse actions resulting from 
investigations or prosecutions of healthcare providers to the NPDB.39  
Final adverse actions must be reported to the NPDB within 30 days 
following the action.40, 41  The NPDB restricts the ability of physicians, 
dentists, and other health care practitioners to move from State to State 
without disclosure or discovery of previous medical malpractice and other 
adverse actions.  Examples of final adverse actions include, but are not 
limited to, convictions, civil judgments (but not civil settlements), and 
program exclusions.   
Although the Unit reported all 270 of its FYs 2012-2014 convictions to 
OIG, the Unit reported 176 (65 percent) of these more than 90 days after 
sentencing.  According to Performance Standard 8(f), a Unit should report 
all convictions to OIG within 30 days of sentencing so that OIG can 
determine whether to exclude convicted providers from billing Federal 
healthcare programs.42   
According to Unit management and staff, Unit staff enter convictions and 
other adverse actions into the Units electronic case file tracking system 
when cases are resolved.  Unit staff monitor the system daily and 
periodically send reminders to Unit prosecutors to send supporting case 
documentation to OIG and/or case information to the NPDB.  Unit staff 
reported that it typically takes up to 6 weeks, and occasionally up to 
3 months, for the courts to submit the necessary supporting documentation 
and/or case information to the Unit.  The Unit reported that these delays in 
obtaining court documentation and/or case information from the various 
courts in which individuals are sentenced contributed to untimely 
reporting of convictions to Federal partners.  However, although these 
 
38 An adverse action is any action that involves reducing, restricting, suspending, 
revoking, or denying clinical privileges or membership in a health care entity.  
45 CFR  60.3.  For a more detailed list of adverse action types, see 
SSA  1128E(g)(1)(A) and 45 CFR  60.5. 
39 SSA  1128E(b) and 45 CFR  60.5.  In addition to the Federal Regulations, 
Performance Standard 8(G) states that Units should report qualifying cases to the 
Healthcare Integrity & Protection Databank, the National Practitioner Data Bank, or 
successor data bases.  We reviewed the reporting of adverse actions under NPDB 
requirements because the HIPDB and the NPDB were merged in May 2013, during 
FYs 2012-2014, and the requirement for reporting that apply to the MFCUs did not 
change under the new NPDB regulation, contained in 45 CFR pt. 60. 
40 45 CFR  60.5.   
41 HHS provided the Units NPDB reporting data to OIG on July 24, 2014. 
42 Although the Unit generated 337 provider convictions during FYs 2012-2014, only 
270 of the convicted providers had been sentenced at the time of our onsite review.  
Therefore, our analysis is based on these 270 providers.   
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  10 
   
   
timeframes can potentially affect the Units ability to report some 
convictions and adverse actions to OIG and the NPDB within 30 days, it 
should not result in the Units reporting 65 percent of its convictions more 
than 90 days after sentencing.      
The Unit generally exercised proper fiscal control of 
its resources; however, it improperly claimed some 
indirect costs 
Consistent with Performance Standard 11, the Unit generally exercised 
proper fiscal control of its resources related to accounting, budgeting, 
personnel, procurement, and equipment.  However, the Unit improperly 
claimed a total of $7,596 (Federal share) of indirect costs for the purchase 
of information technology equipment during FYs 2012-2014.43, 44  
According to the Units approved indirect cost rate agreement, the 
purchase of that type of equipment should not be included as indirect 
costs.45  In addition, the Unit did not include some grant and contract costs 
that should have been included as indirect costs.  As a result, the Unit 
under-claimed approximately $63,128 (Federal share) during 
FYs 2012-2014.46       
Other observations 
During our onsite review, we noted three practices, among others, that the 
Unit reported were beneficial to Unit operations:  (1) the Unit took steps to 
ensure that managed care organizations (MCOs) refer fraud allegations to 
the Unit, (2) the Unit used a field representative to conduct outreach and 
provide training, and (3) Unit workstations within an OIG field office 
reportedly promoted cooperation between the Unit and OIG.   
The Unit took steps to ensure that MCOs refer fraud allegations 
to the Unit 
The Unit took several steps to ensure that MCOs refer fraud allegations to 
the Unit.  Performance Standard 4(a) states that a Unit should take steps to 
ensure that MCOs refer all suspected Medicaid provider fraud cases to the 
 
43 Generally, Units claim indirect costs to fund general operations, such as administrative 
costs. 
44 The Unit improperly claimed the Federal share of indirect costs by $2,812 in FY 2012, 
by $3,938 in FY 2013, and by $846 in FY 2014.  Therefore, the net total of improperly 
claimed indirect costs for the 3-year period was $7,596 (Federal share). 
45 2 CFR  225 Appendix B, Section 15(a)(2). 
46 The Unit under-claimed the Federal share of indirect costs by a net total of $20,606 in 
FY 2012, by $14,611 in FY 2013, and by $27,911 in FY 2014.  Therefore, the net total of 
under-claimed indirect costs for the 3-year period was $63,128 (Federal share). 
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  11 
   
   
Unit.  California State law requires that MCOs refer all provider fraud 
allegations to DHCS.47  However, MCOs are not required to refer such 
allegations to the Unit.  In 2012 and 2015, the Unit director sent letters to 
the DHCS director requesting that DHCS program integrity management 
incorporate language into State contracts with MCOs that would require 
MCOs to notify the Unit of all fraud allegations sent to DHCS.   
In addition, the Unit provides quarterly training conferences for MCO 
representatives in four cities throughout the State.  Unit management 
reported that 21 of the 26 California MCOs send representatives to these 
conferences, and that, in FY 2014, the Unit received 10 fraud referrals 
from MCOs as a direct result of these training conferences.  Also as a 
result of these conferences, some California MCOs now voluntarily copy 
the Unit on every fraud referral sent to DHCS.   
Finally, the Unit entered into a MOU with the California Department of 
Managed Health Care that allows the Unit to request MCO data from it on 
a case-by-case basis.  Whenever an MCO fraud case is referred to the 
Unit, the Unit requests data, as needed, from that department. 
The Unit used a field representative to conduct outreach and 
provide training 
The Unit hired a field representative in 2014 to increase the number of 
fraud referrals the Unit receives.  According to Performance Standard 4(f), 
a Unit should take steps through public outreach or other means to 
encourage the public to refer cases to the Unit.  In addition, Performance 
Standard 4(a) states that a Unit should take steps to ensure that other 
agencies refer all suspected fraud cases to the Unit.  The Units field 
representative acts as a liaison between the Unit and other State agencies, 
conducts public outreach, and trains staff from other agencies about 
Medicaid fraud and the Units role in combatting Medicaid fraud and 
patient abuse and neglect.  According to Unit management, the activities 
of the field representative have increased fraud referrals from other State 
agencies to the Unit.  Because the field representative was a recent hire, 
however, we did not have sufficient information at the time of our onsite 
review to determine whether the field representatives activities resulted in 
an increase in referrals. 
Unit management and OIG reported that colocation of staff 
promoted cooperation between the agencies 
Although the Unit closed its San Francisco Bay Area office in 
2013 because of fiscal constraints, two Unit investigators have 
 
47 California Business & Professions Code, Section 805. 
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  12 
   
   
workstations at the OIG field office in the San Francisco Bay Area.  The 
Unit investigators use the workstations part-time.  According to 
Performance Standards 8(a) and 8(b), a Unit should communicate with 
OIG on a regular basis and cooperate with OIG and other Federal agencies 
on joint cases.  According to Unit management and OIG staff, stationing 
Unit investigators in OIGs field office maintains an active Unit presence 
in the region, facilitates the mutual referral of cases between the Unit and 
OIG, and improves communication and cooperation with OIG on joint 
cases.  OIG reported it spends no additional funds beyond the MFCU 
grant to maintain these workstations. 
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  13 
   
   
CONCLUSION AND RECOMMENDATIONS 
During FYs 2012-2014, the Unit expended $83 million and generated 
337 convictions, 67 civil judgments and settlements, and total recoveries 
of $795 million, $531 million of which was attributed to cases investigated 
directly by the Unit.  Our review found that the Unit was generally in 
compliance with applicable laws, regulations, and policy.  However, the 
Unit should improve some areas of its operations to ensure adherence to 
Performance Standards and compliance with Federal laws and regulations.  
Operational areas that should be improved by the Unit include:  some Unit 
case files lacked certain required documentation, the Unit lacked a training 
plan for its investigators and auditors, and the Unit did not report most 
adverse actions or convictions within appropriate timeframes.  Although 
the Unit generally exercised proper fiscal control of its resources, it 
improperly claimed some indirect costs during FYs 2012-2014 and failed 
to claim other indirect costs it was entitled to claim.  Finally, we noted 
three practices, among others, that the Unit reported were beneficial to 
Unit operations.  Specifically, the Unit:  took steps to ensure it received 
fraud referrals from managed care organizations, used a field 
representative to conduct outreach and provide training, and co-located 
Unit investigators in an OIG field office.   
We recommend that the California Unit:   
Develop and implement procedures to ensure that the Unit 
documents relevant information in its case files 
The Unit should develop and implement procedures to ensure that 
supervisory approval to open and close all cases is documented in the 
Units case files and/or electronic case file tracking system.  These 
procedures also should ensure that documentation of periodic supervisory 
reviews is included in all case files.  If extended investigation delays result 
from resource constraints or other exigencies, the Unit should document 
such circumstances in the associated case files. 
Fully implement the new training plans for Unit investigators 
and auditors 
The Unit should fully implement the training plans for investigators and 
auditors which were newly developed around the time of our onsite review 
in February 2015.  Implementation activities should include ensuring that 
staff are aware of the training plans and that they receive the required 
training.  
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  14 
   
   
Develop and implement procedures to overcome challenges in 
obtaining information needed to report convictions and 
adverse actions to Federal partners within required timeframes 
The Unit should develop and implement procedures to ensure it reports all 
adverse actions to the NPDB and convictions to OIG within 30 days.  For 
example, the Unit could configure its electronic case file tracking system 
to provide automated reminders to report convictions and adverse actions 
to Federal partners in a timely manner. 
Develop and implement procedures to ensure that the Unit 
properly claims its indirect costs 
The Unit should work with OIG to assess whether its current procedures 
are sufficient to ensure that the Unit properly claims its indirect costs. 
 
 
 
 
 
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  15 
   
   
UNIT COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
The Unit concurred with the four report recommendations. 
The Unit concurred with our recommendation to develop and implement 
procedures to ensure that the Unit documents relevant information in its 
case files.  The Unit reported that it transmitted memoranda to all staff 
reminding them of the Units procedures for documenting supervisory 
approval to open and close all cases, as well as its procedures for 
documenting quarterly supervisory reviews.  The Unit also reported that 
its supervisors will now note in the case files the reasons for any 
investigation delays. 
The Unit concurred with our draft recommendation to develop and 
implement training plans for its investigators and auditors.  The Unit 
reported that it had developed training plans for its investigators and 
auditors at the time of our onsite review in February 2015.  In response, 
we revised the draft recommendation to focus on implementation of the 
newly developed training plans. 
The Unit concurred with our recommendation to develop and implement 
procedures to overcome challenges in obtaining information needed to 
report convictions and adverse actions to Federal partners within required 
timeframes.  The Unit reported that it is evaluating whether to use courier 
services to transmit needed documents from the courts to the Unit in a 
timely manner.  In addition, the Unit reported that it is now using its 
electronic case file tracking system to prompt the Units legal staff to 
retrieve needed court documents as soon as possible.   
The Unit concurred with our recommendation to develop and implement 
procedures to ensure that the Unit properly claims its indirect costs.  The 
Unit reported that it will now follow a bulletin, released by the California 
Department of Justice, that provides direction for claiming indirect costs 
and monitoring direct costs associated with capitalized equipment and 
contracts. 
The full text of the Units comments is provided in Appendix F. 
 
 
 
 
 
 
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  16 
   
   
APPENDIX A 
2012 Performance Standards48  
1.  A UNIT CONFORMS WITH ALL APPLICABLE STATUTES, REGULATIONS, AND POLICY DIRECTIVES, 
INCLUDING: 
A.  Section 1903(q) of the Social Security Act,  containing the basic requirements for operation of a MFCU; 
B.  Regulations for operation of a MFCU contained in 42 CFR part 1007; 
C.  Grant administration requirements at 45 CFR part 92 and Federal cost principles at 2 CFR part 225; 
D.  OIG policy transmittals as maintained on the OIG Web site; and  
E.  Terms and conditions of the notice of the grant award. 
2.  A UNIT MAINTAINS REASONABLE STAFF LEVELS AND OFFICE LOCATIONS IN RELATION TO THE 
STATES MEDICAID PROGRAM EXPENDITURES AND IN ACCORDANCE WITH STAFFING 
ALLOCATIONS APPROVED IN ITS BUDGET.   
A.  The Unit employs the number of staff that is included in the Units budget estimate as approved by OIG. 
B.  The Unit employs a total number of professional staff that is commensurate with the States total Medicaid 
program expenditures and that enables the Unit to effectively investigate and prosecute (or refer for 
prosecution) an appropriate volume of case referrals and workload for both Medicaid fraud and patient abuse 
and neglect. 
C.  The Unit employs an appropriate mix and number of attorneys, auditors, investigators, and other 
professional staff that is both commensurate with the States total Medicaid program expenditures and that 
allows the Unit to effectively investigate and prosecute (or refer for prosecution) an appropriate volume of case 
referrals and workload for both Medicaid fraud and patient abuse and neglect. 
D.  The Unit employs a number of support staff in relation to its overall size that allows the Unit to operate 
effectively. 
E.  To the extent that a Unit maintains multiple office locations, such locations are distributed throughout the 
State, and are adequately staffed, commensurate with the volume of case referrals and workload for each 
location. 
3. A UNIT ESTABLISHES WRITTEN POLICIES AND PROCEDURES FOR ITS OPERATIONS AND 
ENSURES THAT STAFF ARE FAMILIAR WITH, AND ADHERE TO, POLICIES AND PROCEDURES.   
A.  The Unit has written guidelines or manuals that contain current policies and procedures, consistent with 
these performance standards, for the investigation and (for those Units with prosecutorial authority) prosecution 
of Medicaid fraud and patient abuse and neglect.  
B.  The Unit adheres to current policies and procedures in its operations. 
C.  Procedures include a process for referring cases, when appropriate, to Federal and State agencies.  
Referrals to State agencies, including the State Medicaid agency, should identify whether further investigation 
or other administrative action is warranted, such as the collection of overpayments or suspension of payments. 
D.  Written guidelines and manuals are readily available to all Unit staff, either online or in hard copy. 
E.  Policies and procedures address training standards for Unit employees. 
4. A UNIT TAKES STEPS TO MAINTAIN AN ADEQUATE VOLUME AND QUALITY OF REFERRALS FROM 
THE STATE MEDICAID AGENCY AND OTHER SOURCES.   
A.  The Unit takes steps, such as the development of operational protocols, to ensure that the State Medicaid 
agency, managed care organizations, and other agencies refer to the Unit all suspected provider fraud cases.  
Consistent with 42 CFR 1007.9(g), the Unit provides timely written notice to the State Medicaid agency when 
referred cases are accepted or declined for investigation. 
B.  The Unit provides periodic feedback to the State Medicaid agency and other referral sources on the 
adequacy of both the volume and quality of its referrals. 
 
48 77 Fed. Reg. 32645, June 1, 2012. 
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  17 
   
   
C.  The Unit provides timely information to the State Medicaid or other agency when the Medicaid or other 
agency requests information on the status of MFCU investigations, including when the Medicaid agency 
requests quarterly certification pursuant to 42 CFR 455.23(d)(3)(ii). 
D.  For those States in which the Unit has original jurisdiction to investigate or prosecute patient abuse and 
neglect cases, the Unit takes steps, such as the development of operational protocols, to ensure that pertinent 
agencies refer such cases to the Unit, consistent with patient confidentiality and consent.  Pertinent agencies 
vary by State but may include licensing and certification agencies, the State Long Term Care Ombudsman, and 
adult protective services offices.  
E.  The Unit provides timely information, when requested, to those agencies identified in (D) above regarding 
the status of referrals. 
F.  The Unit takes steps, through public outreach or other means, to encourage the public to refer cases to the 
Unit. 
5. A UNIT TAKES STEPS TO MAINTAIN A CONTINUOUS CASE FLOW AND TO COMPLETE CASES IN AN 
APPROPRIATE TIMEFRAME BASED ON THE COMPLEXITY OF THE CASES. 
A.  Each stage of an investigation and prosecution is completed in an appropriate timeframe. 
B.  Supervisors approve the opening and closing of all investigations and review the progress of cases and take 
action as necessary to ensure that each stage of an investigation and prosecution is completed in an 
appropriate timeframe. 
C.  Delays to investigations and prosecutions are limited to situations imposed by resource constraints or other 
exigencies.   
6.  A UNITS CASE MIX, AS PRACTICABLE, COVERS ALL SIGNIFICANT PROVIDER TYPES AND 
INCLUDES A BALANCE OF FRAUD AND, WHERE APPROPRIATE, PATIENT ABUSE AND NEGLECT 
CASES.   
A.  The Unit seeks to have a mix of cases from all significant provider types in the State. 
B.  For those States that rely substantially on managed care entities for the provision of Medicaid services, the 
Unit includes a commensurate number of managed care cases in its mix of cases.  
D.  As part of its case mix, the Unit maintains a balance of fraud and patient abuse and neglect cases for those 
States in which the Unit has original jurisdiction to investigate or prosecute patient abuse and neglect cases. 
C.  The Unit seeks to allocate resources among provider types based on levels of Medicaid expenditures or 
other risk factors.  Special Unit initiatives may focus on specific provider types. 
E.  As part of its case mix, the Unit seeks to maintain, consistent with its legal authorities, a balance of criminal 
and civil fraud cases. 
7.  A UNIT MAINTAINS CASE FILES IN AN EFFECTIVE MANNER AND DEVELOPS A CASE 
MANAGEMENT SYSTEM THAT ALLOWS EFFICIENT ACCESS TO CASE INFORMATION AND OTHER 
PERFORMANCE DATA.   
A.  Reviews by supervisors are conducted periodically, consistent with MFCU policies and procedures, and are 
noted in the case file. 
B.  Case files include all relevant facts and information and justify the opening and closing of the cases. 
C.  Significant documents, such as charging documents and settlement agreements, are included in the file.  
D.  Interview summaries are written promptly, as defined by the Units policies and procedures. 
E.  The Unit has an information management system that manages and tracks case information from initiation to 
resolution. 
F. The Unit has an information management system that allows for the monitoring and reporting of case 
information, including the following:  
1. The number of cases opened and closed and the reason that cases are closed. 
2.  The length of time taken to determine whether to open a case referred by the State Medicaid agency or other 
referring source. 
3.  The number, age, and types of cases in the Units inventory/docket 
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  18 
   
   
4.  The number of referrals received by the Unit and the number of referrals by the Unit to other agencies. 
5.  The number of cases criminally prosecuted by the Unit or referred to others for prosecution, the number of 
individuals or entities charged, and the number of pending prosecutions. 
6.  The number of criminal convictions and the number of civil judgments. 
7.  The dollar amount of overpayments identified. 
8.  The dollar amount of fines, penalties, and restitution ordered in a criminal case and the dollar amount of 
recoveries and the types of relief obtained through civil judgments or prefiling settlements. 
8.  A UNIT COOPERATES WITH OIG AND OTHER FEDERAL AGENCIES IN THE INVESTIGATION AND 
PROSECUTION OF MEDICAID AND OTHER HEALTH CARE FRAUD.   
A.   The Unit communicates on a regular basis with OIG and other Federal agencies investigating or 
prosecuting health care fraud in the State. 
B.  The Unit cooperates and, as appropriate, coordinates with OIGs Office of Investigations and other Federal 
agencies on cases being pursued jointly, cases involving the same suspects or allegations, and cases that have 
been referred to the Unit by OIG or another Federal agency.  
C.  The Unit makes available, to the extent authorized by law and upon request by Federal investigators and 
prosecutors, all information in its possession concerning provider fraud or fraud in the administration of the 
Medicaid program. 
D.  For cases that require the granting of extended jurisdiction to investigate Medicare or other Federal health 
care fraud, the Unit seeks permission from OIG or other relevant agencies under procedures as set by those 
agencies.  
E.  For cases that have civil fraud potential, the Unit investigates and prosecutes such cases under State 
authority or refers such cases to OIG or the U.S. Department of Justice. 
F.  The Unit transmits to OIG, for purposes of program exclusions under section 1128 of the Social Security Act, 
all pertinent information on MFCU convictions within 30 days of sentencing, including charging documents, plea 
agreements, and sentencing orders. 
G.  The Unit reports qualifying cases to the Healthcare Integrity & Protection Databank, the National Practitioner 
Data Bank, or successor data bases. 
9. A UNIT MAKES STATUTORY OR PROGRAMMATIC RECOMMENDATIONS, WHEN WARRANTED, TO 
THE STATE GOVERNMENT.   
A.  The Unit, when warranted and appropriate, makes statutory recommendations to the State legislature to 
improve the operation of the Unit, including amendments to the enforcement provisions of the State code. 
B.  The Unit, when warranted and appropriate, makes other regulatory or administrative recommendations 
regarding program integrity issues to the State Medicaid agency and to other agencies responsible for Medicaid 
operations or funding.  The Unit monitors actions taken by the State legislature and the State Medicaid or other 
agencies in response to recommendations.  
10. A UNIT PERIODICALLY REVIEWS ITS MEMORANDUM OF UNDERSTANDING (MOU) WITH THE 
STATE MEDICAID AGENCY TO ENSURE THAT IT REFLECTS CURRENT PRACTICE, POLICY, AND 
LEGAL REQUIREMENTS.   
A.  The MFCU documents that it has reviewed the MOU at least every 5 years, and has renegotiated the MOU 
as necessary, to ensure that it reflects current practice, policy, and legal requirements. 
B.  The MOU meets current Federal legal requirements as contained in law or regulation, including 42 CFR  
455.21, Cooperation with State Medicaid fraud control units, and 42 CFR  455.23, Suspension of payments 
in cases of fraud. 
C.  The MOU is consistent with current Federal and State policy, including any policies issued by OIG or the 
Centers for Medicare & Medicaid Services (CMS). 
D.  Consistent with Performance Standard 4, the MOU establishes a process to ensure the receipt of an 
adequate volume and quality of referrals to the Unit from the State Medicaid agency. 
E.  The MOU incorporates by reference the CMS Performance Standard for Referrals of Suspected Fraud from 
a State Agency to a Medicaid Fraud Control Unit. 
11. A UNIT EXERCISES PROPER FISCAL CONTROL OVER UNIT RESOURCES.   
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  19 
   
   
A.  The Unit promptly submits to OIG its preliminary budget estimates, proposed budget, and Federal financial 
expenditure reports.   
B.  The Unit maintains an equipment inventory that is updated regularly to reflect all property under the Units 
control. 
C.  The Unit maintains an effective time and attendance system and personnel activity records. 
D.  The Unit applies generally accepted accounting principles in its control of Unit funding. 
E.  The Unit employs a financial system in compliance with the standards for financial management systems 
contained in 45 CFR 92.20. 
12. A UNIT CONDUCTS TRAINING THAT AIDS IN THE MISSION OF THE UNIT.   
A.  The Unit maintains a training plan for each professional discipline that includes an annual minimum number 
of training hours and that is at least as stringent as required for professional certification.  
B.  The Unit ensures that professional staff comply with their training plans and maintain records of their staffs 
compliance. 
C.  Professional certifications are maintained for all staff, including those that fulfill continuing education 
requirements. 
D.  The Unit participates in MFCU-related training, including training offered by OIG and other MFCUs, as such 
training is available and as funding permits. 
E.  The Unit participates in cross-training with the fraud detection staff of the State Medicaid agency.  As part of 
such training, Unit staff provide training on the elements of successful fraud referrals and receive training on the 
role and responsibilities of the State Medicaid agency.  
 
 
 
 
 
 
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  20 
   
   
APPENDIX B 
Referrals of Provider Fraud and Patient Abuse and Neglect to 
the California MFCU by Source, FYs 2012 through 2014 
Table B-1:  Total MFCU Referrals of Fraud and Abuse and Annual Average 
 
Case Type  FY 2012  FY 2013  FY 2014  3-Year Total  Annual Average* 
  Patient Abuse 
3,772  2,529  2,968  9,269  3,090 
and Neglect 
 
  Provider Fraud  338  651  495  1,484  495 
  Total  4,110  3,180  3,463  10,753  3,584 
 
  Source:  MFCU response to OIG data request. 
 
*Averages in this table are rounded.
 
 
Table B-2:  MFCU Referrals, by Referral Source 
 
 
  FY 2012  FY 2013  FY 2014   
Abuse  Abuse  Abuse  Percentage 
Referral 
Fraud  and  Fraud  and  Fraud  and  Total  of All 
Source 
Neglect  Neglect  Neglect  Referrals* 
State Survey 
and Certification  13  1,435  14  1,306  19  1,950  4,737  44.1% 
Agency 
Private Citizens  251  343  452  608  359  533  2,546  23.7% 
LTC 
8  1,927  4  393  1  177  2,510  23.3% 
Ombudsman 
Other State 
4  25  16  105  20  165  335  3.1% 
Agencies 
State Medicaid 
42  6  118  14  49  10  239  2.2% 
Agency 
Law 
0  23  1  38  7  24  93  0.9% 
Enforcement 
Self-Generated  0  6  16  10  16  8  56  0.5% 
Adult Protective 
0  4  2  13  0  22  41  0.4% 
Services 
Managed Care 
0  0  0  0  10  0  10  <0.1% 
Organizations 
Other  20  3  28  42  14  79  186  1.7% 
Total  338  3,772  651  2,529  495  2,968  10,753  100% 
Annual Total  4,110  3,180  3,463     
Annual 
3,584     
Average* 
Source:  MFCU response to OIG data request.   
*These figures are rounded. 
 
 
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  21 
   
   
APPENDIX C 
Investigations Opened and Closed by the California MFCU, by 
Provider Category and Case Type, FYs 2012 through 2014 
 
Table C-1:  Total Annual Opened and Closed Investigations 
 
  Annual    
  Case Type  FY 2012  FY 2013  FY 2014  3-Year Total  Average* 
  Opened  811  867  954  2,632  877 
Patient Abuse and 
455  462  676  1,593  531 
Neglect 
Provider Fraud  356  405  278  1,039  346 
Closed  847  808  862  2,517  839 
Patient Abuse and 
464  480  575  1,519  506 
Neglect 
Provider Fraud  383  328  287  998  333 
Source:  MFCU response to OIG data request. 
*Averages in this column are rounded. 
 
 
 
Table C-2:  Patient Abuse and Neglect Investigations 
 
Provider Category  FY 2012  FY 2013  FY 2014 
        
Opened  Closed  Opened  Closed  Opened  Closed 
Home Health Aides  6  7  15  10  7  7 
Non-Direct Care  0  0  0  0  3  0 
Nursing Facilities  124  102  118  129  173  188 
Other Long-Term Care 
18  14  34  26  38  27 
Facilities 
Physicians 
Assistants/Nurses/Nurse 
119  151  109  138  253  180 
Practitioners/Certified Nurse 
Aides 
Other  188  190  186  177  202  173 
Total  455  464  462  480  676  575 
Source:  Unit response to OIG data request. 
 
 
 
 
 
 
 
 
 
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  22 
   
   
Table C-3:  Provider Fraud Investigations 
 
Provider Category  FY 2012  FY 2013  FY 2014 
Facilities  Opened  Closed  Opened  Closed  Opened  Closed 
Hospitals  10  3  4  6  4  3 
Nursing Facilities  9  8  4  9  4  3 
Other Long-Term Care 
2  1  3  3  0  0 
Facilities 
Substance Abuse 
2  3  68  7  30  4 
Treatment Centers 
Other Facilities  26  0  10  16  9  17 
  Subtotal  49  15  89  41  47  27 
Practitioners  Opened  Closed  Opened  Closed  Opened  Closed 
Chiropractors  2  0  0  1  0  0 
Counselors/ Psychologists  0  1  0  0  0  0 
Dentists  20  16  10  19  5  13 
Doctors of Medicine or 
40  55  40  50  35  34 
Osteopathy 
Podiatrists  3  1  0  0  1  0 
Other Practitioners  4  3  1  2  5  2 
  Subtotal  69  76  51  72  46  49 
Medical Support  Opened  Closed  Opened  Closed  Opened  Closed 
Durable Medical 
16  33  8  10  13  30 
Equipment Suppliers 
Home Health Care 
4  6  2  2  3  1 
Agencies 
Home Health Care Aides  40  63  46  53  5  35 
Laboratories  5  23  6  6  5  6 
Nurses and Physician 
 
Assistants Physicians 
Assistants/Nurses/Nurse  5  17  4  11  12  8 
Practitioners/Certified 
Nurse Aides 
Pharmaceutical 
38  6  26  19  22  10 
Manufacturers 
Pharmacies  36  29  36  17  24  18 
Radiologists  0  2  1  0  1  2 
Transportation Services  7  8  7  14  4  10 
Other Medical Support  17  3  7  18  6  9 
  Subtotal  168  190  143  150  95  129 
Program Related  Opened  Closed  Opened  Closed  Opened  Closed 
Billing Company  0  2  3  2  1  2 
Managed Care  0  0  1  1  0  1 
Medicaid Program 
0  2  1  0  0  1 
Administration 
Other Program Related  70  98  117  62  89  78 
  Subtotal  70  102  122  65  90  82 
  Total  356  383  405  328  278  287 
 
Source:  Unit response to OIG data request.
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  23 
   
   
APPENDIX D 
Methodology 
We analyzed data from seven sources to describe the caseload and assess 
the performance of the MFCU.  We also analyzed the data to identify any 
opportunities for improvement and any instances in which the MFCU did 
not meet the performance standards or was not operating in accordance 
with laws, regulations, and/or policy transmittals.49  In addition, we noted 
practices that appeared to benefit the MFCU.  We based these 
observations on statements from stakeholders and MFCU staff and an 
analysis of collected data.   
Data Collection and Analysis 
Review of MFCU Documentation.  We collected and reviewed (1) MFCU 
documentation, including policies and procedures related to the Units 
operations, staffing, and FYs 2012-2014 caseload; (2) the MFCUs annual 
reports and quarterly statistical reports; and (3) the MFCUs responses to 
recertification questionnaires.  The documentation also included data such 
as the number of referrals received by the MFCU and the number of 
investigations opened and closed.  We reviewed the documentation to 
determine how the MFCU investigates and prosecutes Medicaid cases.  
We also checked documentation to ensure that the MFCU referred 
sentenced individuals to OIG for program exclusion and that the MFCU 
reported adverse actions to the NPDB.  Additionally, we confirmed with 
the MFCU director that the documentation we had was current at the time 
of our review and requested any additional data or clarification, as needed.  
The data we collected from the MFCU were current as of April 15, 2015.  
Subsequent changes to the data would therefore not be included in our 
analyses.   
Review of Financial Documentation.  To evaluate internal control of fiscal 
resources, OIG auditors reviewed policies and procedures related to the 
MFCUs budgeting, accounting systems, cash management, procurement, 
property, and staffing.  We obtained the MFCUs claimed grant 
expenditures for FYs 2012-2014 to (1) review final Federal Status 
Reports50 and supporting documentation, (2) select and review transactions 
within direct cost categories to determine if costs were allowable, and 
(3) verify that indirect costs were accurately computed using the approved 
 
49 All relevant regulations, statutes, and policy transmittals are available online at 
http://oig.hhs.gov.  
50 The MFCU transmits Federal Status Reports to OIGs Office of Management and 
Policy on a quarterly and annual basis.  These financial reports detail MFCU income and 
expenditures. 
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  24 
   
   
indirect cost rate.  Finally, we reviewed records in the HHS Payment 
Management System (PMS)51 and revenue accounts to identify any 
unreported program income.52 
Structured Interviews With Key Stakeholders.  We conducted structured 
interviews with 11 individual stakeholders among 7 agencies who were 
familiar with MFCU operations.  Specifically, we interviewed one 
program integrity manager from the Medicaid agency; an Assistant U.S. 
Attorney; the Criminal Division supervisor for the California Attorney 
Generals Office;53 three managers from the California Department of 
Public Health; three managers from the California Department of Social 
Services; two OIG Assistant Special Agents in Charge for the State of 
California; and a California Adult Protective Services supervisor.  These 
interviews focused on the MFCUs interaction with external agencies, 
MFCU operations, opportunities for improvement, and any practices that 
appeared to benefit the MFCU. 
Survey of MFCU Staff.  We conducted an online survey of MFCU staff.54  
We requested responses from 175 staff members and received 
164 responses, for a 94percent response rate.  Our questions focused on 
MFCU operations, opportunities for improvement, and practices that 
appeared to benefit the MFCU.  The survey also sought information about 
the MFCUs compliance with applicable laws, regulations, and policy 
transmittals.   
Structured Interviews With MFCU Management and Selected Staff.  We 
conducted structured interviews with the MFCUs director, chief 
investigator, CID supervisor, field representative, and eight regional 
supervisors.  We asked them to provide us with additional information to 
better understand the MFCUs operations, identify opportunities for 
improvement, identify practices that appeared to benefit the MFCU, and to 
clarify information obtained from other data sources.  
Onsite Review of Case Files.  We requested that the Unit provide us with a 
list of cases that were open at any point during FYs 2012-2014.  The Unit 
 
51 The PMS is a grant payment system operated and maintained by the HHS Program 
Support Center, Division of Payment Management.  The PMS provides disbursement, 
grant monitoring, reporting, and case management services to awarding agencies and 
grant recipients, such as MFCUs. 
52 Program income is defined as gross income received by the grantee or subgrantee 
directly generated by a grant supported activity, or earned only as a result of the grant 
agreement during the grant period.  45 CFR  92.25(b). 
53 The Criminal Division supervisor supervises the MFCU director. 
54 We did not survey the MFCU director, chief investigator, or other regional supervisors 
whom we interviewed remotely or onsite. 
 
 
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provided a list of 4,602 cases that were open during FYs 2012-2014.55  For 
each of these 4,602 cases, the Unit provided data, including:  the current 
status of each case; whether each case was criminal, civil, or global; and 
the date on which each case was opened.  From this list of cases, we 
excluded 482 cases that were categorized as global.  The remaining 
number of case files was 4,120. 
From the 4,120 remaining case files, we selected a simple random sample 
of 100 cases for review.  To assess the Units processes for monitoring the 
status and outcomes of cases, we reviewed documentation in the case files 
and case file tracking system that was associated with the sample of cases.  
From this initial sample of 100 case files, we selected a simple random 
sample of 50 files for a qualitative review of selected issues, such as case 
development.  While onsite, we consulted MFCU staff to address any 
apparent issues with individual case files, such as missing documentation.   
We did not review 13 of the sampled cases because they were 
misidentified by the Unit as being open during FYs 2012-2014.  Each of 
these cases were closed before FY 2012 and, therefore, were ineligible to 
be in our sample.  After excluding the ineligible cases, we reviewed 
87 sampled case files total.  Of these 87 case files, there were 60 closed 
cases, 61 cases that were open for at least 6 months, and 41 cases that 
were open for at least 1 year.  
Considering that there were 13 ineligible cases in the 100-case sample, it 
is possible that there were other ineligible cases in the population of 
4,120 cases that the Unit identified as non-global and open at any point 
during FYs 2012-2014.  Therefore, we estimated the number of case files 
in the population based on the eligible sample, as shown in Table  
D-1.  We estimated (1) the total number of eligible case files, (2) the 
number of eligible closed case files, (3) the number of eligible case files 
that were open for at least 6 months, and (4) the number of eligible case 
files that were open for at least 1 year. 
 
55 This figure includes some cases opened before FY 2012 that remained open at some 
point during FYs 2012-2014.   
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  26 
   
   
Table D-1:  Estimates of the Population of Eligible Case Files 
Population 
Sampled  95-percent 
Estimate Description  of Case 
Case Files  Confidence Interval 
Files 
Total eligible case files  87  3,584  3,2503,825 
Eligible closed case 
60  2,472  2,0532,866 
files 
Eligible case files open 
61  2,513  2,0952,905 
for at least 6 months 
Eligible case files open 
41  1,689  1,2922,109 
for at least 1 year 
Source:  OIG analysis of California MFCU case files, 2015. 
Using the results of our review of the sampled case files, we report one 
estimate for each of the above subpopulations.  The point estimates and 
their 95-percent confidence intervals are in Appendix E. 
Onsite Observation of MFCU Operations.  While onsite, we observed the 
MFCUs operations.  Specifically, we observed the intake of referrals, 
security of data and case files, and the general functioning of the MFCU.   
 
 
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  27 
   
   
APPENDIX E 
Point Estimates and 95-Percent Confidence Intervals Based on 
Reviews of Case Files 
95-Percent Confidence 
Sample  Point  Interval 
Estimate Description 
Size  Estimate 
Lower  Upper 
Percentage of case files that did 
not include documentation of  87  40.2%  30.0%  51.2% 
supervisory approval for opening 
Percentage of closed case files 
that did not include documentation  60  8.3%  2.8%  18.3% 
of supervisory approval for closing 
Percentage of case files that were 
open for at least 6 months that did 
61  26.2%  15.9%  39.0% 
not include documentation of 
periodic supervisory review 
Percentage of case files that were 
open for at least 1 year that did not 
41  12.2%  4.1%  26.1% 
include documentation explaining 
investigation delays 
 
Source:  OIG analysis of California MFCU case files, 2015. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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APPENDIX F 
Unit Comments 
 
 
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ACKNOWLEDGMENTS 
This report was prepared under the direction of Blaine Collins, Regional 
Inspector General for Evaluation and Inspections in the San Francisco 
regional office, and Michael Henry, Deputy Regional Inspector General. 
Matthew DeFraga served as the team leader for this study and Rosemary 
Rawlins served as the lead analyst.  Other Office of Evaluation and 
Inspections staff who provided support include Joyce Greenleaf.  Central 
office staff who provided support include Susan Burbach, Kevin Farber, 
Joanne Legomsky, and Andrew VanLandingham.  Office of Audit Services 
staff who provided support include Debashis Bhattacharya, Jackson Chen, 
and Cristina Gomez.  Office of Investigations staff also participated in this 
review.   
 
 
California State Medicaid Fraud Control Unit:  2015 Onsite Review (OEI-09-15-00070)  34 
   
Office of Inspector General 
http://oig.hhs.gov 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95452, 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 individuals 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 individuals.  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.