No. 03-13-00526-CV 

____________________________ 

IN THE COURT OF APPEALS FOR THE THIRD DISTRICT OF TEXAS 

AUSTIN, TEXAS 

____________________________ 

PHARMSERV, INC. 

APPELLANT, 

V. 

TEXAS DEPARTMENT OF HEALTH AND HUMAN SERVICES, AND 

OFFICE OF THE INSPECTOR GENERAL OF THE TEXAS HEALTH AND 

HUMAN SERVICES COMMISSION, DOUG WILSON 

AND KYLE L. JANEK, M.D. 

APPELLEES. 

____________________________ 

BRIEF AMICUS CURIAE OF SOUTHWEST PHARMACY SOLUTIONS 

d/b/a AMERICAN PHARMACIES 

IN SUPPORT OF THE APPELLANT

____________________________ 

On Appeal from the 

261st Judicial District Court of Travis County, Texas 

Cause No. D-1-GN-12-001074 

____________________________ 

TAYLOR DUNHAM AND RODRIGUEZ, LLP 

301 CONGRESS AVENUE, SUITE 1050

AUSTIN, TEXAS 78701

(512) 473-2257 TELEPHONE 

(512) 478-4409 FACSIMILE

MIGUEL S. RODRIGUEZ 

STATE BAR NO. 24007938

MRODRIGUEZ@TAYLORDUNHAM.COM

ATTORNEYS FOR SOUTHWEST PHARMACY 

SOLUTIONS, INC. D/B/A AMERICAN 

PHARMACIES 

ACCEPTED

03-13-00526-CV

3738137

THIRD COURT OF APPEALS

AUSTIN, TEXAS

1/12/2015 4:11:39 PM

JEFFREY D. KYLE

CLERK

 RECEIVED IN 3rd COURT OF APPEALS AUSTIN, TEXAS 1/12/2015 4:11:39 PM JEFFREY D. KYLE Clerk
i

IDENTITY OF PARTIES AND COUNSEL

1. Petitioner/Appellant/Plaintiff 

Pharmserv, Inc. 

Represented by: 

Jeff Avant 

Avant & Mitchell, L.P. 

700 Lavaca, Suite 1400 

Austin, Texas 78701 

(512) 478-5757 Telephone 

(512) 478-5404 Facsimile 

avantlaw@swbell.net

 and 

Hugh Barton 

Hugh M. Barton, P.C. 

603 West 13th St., Ste 1B 

Austin, Texas 78701 

(512) 499-0793 Telephone 

(512) 727-6717 Facsimile 

bartonlaw@yahoo.com

2. Respondents/Appellees/Defendants 

Texas Health and Human Services Commission 

Office of Inspector General of the Texas Health and Human Services 

Commission 

Dr. Kyle Janak, Appellee, in his official capacity currently acting as 

Executive Commissioner of the TxHHSC 

Mr. Douglas Wilson, in his official capacity as Inspector 

General of the Office of Inspector General Office of TxHHSC 

Represented by: 
ii

Ann Hartley 

Assistant Attorney General of the Financial, 

Tax and Litigation Section or the Texas Office of the Attorney 

General 

P.O. Box 12548 

Austin, Texas 78711-2548 

(512) 936-1313 Telephone 

(512) 477-2348 Facsimile 

ann.hartley@texasattorneygeneral.gov

3. Amicus Curiae

Southwest Pharmacy Solutions, Inc. d/b/a American Pharmacies

 Represented by: 

Miguel S. Rodriguez 

Taylor Dunham and Rodriguez, LLP 

301 Congress Avenue, Suite 1050 

Austin, Texas 78701 

(512) 473-2257 Telephone 

(512) 478-4409 Facsimile 

mrodriguez@taylordunham.com

 
iii

TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL ............................................................. i

TABLE OF CONTENTS ......................................................................................... iii

INDEX OF AUTHORITIES ..................................................................................... iv

INTEREST OF AMICUS CURIAE ............................................................................ 1

SUMMARY OF THE ARGUMENT ........................................................................ 2

ARGUMENT ............................................................................................................. 4

CONCLUSION .......................................................................................................... 8

CERTIFICATE OF COMPLIANCE ......................................................................... 9

CERTIFICATE OF SERVICE .................................................................................. 9

APPENDIX .............................................................................................................. 10

 
iv

INDEX OF AUTHORITIES

 Page(s) 

Statutes

TEX. GOV’T CODE § 2001.003(1) ............................................................................... 6 

TEX. GOV’T CODE § 2001.171 .................................................................................... 6 

Rules

1 TEX. ADMIN. CODE § 371.1601(18) (eff. 1/9/2005) ................................................ 6 

1 TEX. ADMIN. CODE § 371.1601(33) (eff. 1/9/2005) ................................................ 7 

1 TEX. ADMIN. CODE § 371.1601(41) (eff. 1/9/2005) ................................................ 6 

1 TEX. ADMIN. CODE § 371.1601(45) (eff. 1/9/2005) ................................................ 4 

1 TEX. ADMIN. CODE § 371.1603(f) (eff. 1/9/2005) .................................................. 7 

1 TEX. ADMIN. CODE § 371.1603(j)(2) (eff. 1/9/2005) .............................................. 5 

1 TEX. ADMIN. CODE § 371.1613 (eff. 1/9/2005) ...................................................... 7 

1 TEX. ADMIN. CODE § 371.1643(c) (eff. 1/9/2005) .................................................. 5 

1 TEX. ADMIN. CODE § 371.1647(c) and (d)(5) (eff. 1/9/2005) ................................. 6 

1 TEX. ADMIN. CODE § 371.1667(a) (eff. 1/9/2005) .................................................. 6 

1 TEX. ADMIN. CODE § 371.1667(b) (eff. 1/9/2005) .................................................. 6 

1 TEX. ADMIN. CODE § 371.1669(a) (eff. 1/9/2005) .................................................. 6 

1 TEX. ADMIN. CODE § 371.1709(h) (eff. 4/10/11) .................................................... 7 

1 TEX. ADMIN. CODE § 371.1719(d)(4) (eff. 4/10/11) ............................................... 7 
INTEREST OF AMICUS CURIAE

American Pharmacies is a for-profit, member-owned, independent pharmacy 

cooperative with over 600 members operating in several states, including Texas. 

PharmServ, Inc. is one of American Pharmacies’ members. The vast majority of 

the members of American Pharmacies are pharmacy providers in the Texas 

Medicaid Vendor Drug Program overseen by the Texas Health and Human 

Services Commission (“HHSC”). From time to time, many of the pharmacy 

providers who are members of American Pharmacies are the subject of audits by 

the HHSC Office of Inspector General (“HHSC-OIG”) and, in some cases, the 

HHSC-OIG seeks recoupment for alleged overpayments. Many of those 

recoupment allegations include the use of a sampling process to extrapolate the 

findings of an audit across a population of unaudited claims. 

American Pharmacies devotes significant resources to advocating in the 

legislature and the courts of Texas to advance and protect the interests of its 

member-pharmacies. American Pharmacies has no parent corporation, and no 

publicly held corporation owns 10% or more of its stock. 

This brief is being submitted in support of Appellant. 

American Pharmacies is the source of all fees paid or to be paid for 

preparing this brief. 

 
2

SUMMARY OF THE ARGUMENT

 American Pharmacies respectfully submits this brief as a friend of the Court 

to bring to the Court’s attention an area of analysis not closely focused upon by the 

parties to this appeal. 

The members of American Pharmacies, a purchasing cooperative, are 

independent pharmacies. These are small businesses, often owned by the 

pharmacist behind the counter. They stand ready to serve their community and are 

an integral component of the delivery of health care services. Appellant is just one 

of hundreds of other independently-owned small-business pharmacies in Texas 

serving the Medicaid population. The HHSC-OIG audits of these pharmacies 

often identify small clerical errors on a script (a missing date, word or notation) 

that most often do not question the fact that a patient received the correct 

medication and that the State was billed the correct amount for the quantity of 

medication dispensed to the patient. Therefore, the “overpayments” imposed as 

sanctions act to recoup money from the pharmacy even though the pharmacy has 

already unquestionably provided medicine to the patient. As a result, the 

pharmacy is left without its inventory and its revenue. 

However, the imposition of monetary sanctions of hundreds of thousands of 

dollars or more (as a result of extrapolated findings from a sampling process) is, in 

most cases, a death sentence to such a business. The HHSC regulations in effect in 
3

2010, the time that HHSC imposed its administrative sanctions upon Appellant, 

provided that Medicaid providers such as Appellant would be afforded due 

process. 

 The thrust of the argument of HHSC-OIG is that it may impose an 

administrative sanction upon Appellant but give the sanction a different label to 

avoid providing the required due process. 

However, HHSC-OIG’s demand for nearly $1 million in payments from 

Appellant and the imposition of a hold on any future payments to Appellant is 

within the direct ambit of the definition of an “administrative sanction” set forth in 

the regulations applicable to Appellant at the time of their imposition in 2010. 

Whether HHSC-OIG’s demand for the return of such amounts is the result 

of a claim of fraud or clerical error is of no moment in the analysis. The 

regulations plainly state that demands for recoupment of overpayments, including 

the withholding of future payments, are administrative sanctions which require a 

right of a formal appeal hearing to be afforded to the provider prior to their 

imposition. 

The requirement to provide such due process protections is important not 

just to the Appellant in this case, but to the hundreds of other small business 

pharmacies subject to audit by HHSC-OIG. 
4

Because HHSC-OIG’s duty to provide a right to a formal appeal hearing and 

judicial review is nondiscretionary, jurisdiction exists to compel such forms of due 

process. 

ARGUMENT

A. In 2010, HHSC-OIG Imposed “Administrative Sanctions” Upon 

 Appellant. 

 As reflected in the record, on October 13, 2010, HHSC-OIG declared that 

“[a]fter summarizing the audit exceptions and extrapolating to the population (the 

error rate and amounts) the Office of the Inspector General determined that the 

Vendor owes the State of Texas $900.916.96.” (Clerk’s Record at page 40). In its 

letter, HHSC-OIG (1) demanded payment in the amount of $900,916.96 within 

thirty days and (2) indicated that a hold would be placed on the Appellant’s claims 

if payment was not received by the due date or a payment plan could not be agreed 

upon. (Clerk’s Record at pages 57-58). In other words, by this letter, HHSC-OIG 

was seeking recoupment of $900,916.96 in alleged overpayments and instituting a 

payment hold on future payments to the Pharmacy. 

 The regulations in effect at the time defined such a demand for payment and 

utilization of a hold on payment as “administrative sanctions” subject to an 

entitlement to due process. 

 Specifically, the demand for payment of $900,916.96 and hold on future 

payments constituted a “recoupment of overpayment.” See 1 TEX. ADMIN. CODE § 
5

371.1601(45) (eff. 1/9/2005) (emphasis added) (defining a “recoupment of 

overpayment” as a “sanction imposed to recover funds paid to the provider or 

person to which they were not entitled” and describing the recoupment as either 

being taken in a lump sum, monthly payments or a reduction of payments to the 

provider, in full or in part). 

 The regulations further provided that a recoupment of overpayments, 

including a “recoupment of overpayments projected from a sampling process” (as 

was performed in this case), are “administrative sanctions.” See 1 TEX. ADMIN.

CODE § 371.1643(c) (eff. 1/9/2005). 

B. In 2010, the Imposition of Administrative Sanctions Triggered Due 

 Process Rights Including an Opportunity for a “Formal Appeal 

 Hearing.” 

 HHSC’s regulations in effect in 2010 recognized the seriousness of the 

power given to HHSC-OIG to impose sanctions on a provider. As a result, the 

same regulations which granted HHSC-OIG such power also required that the 

provider be afforded due process notice and hearing requirements. 

(2)Sanctions – Sanctions may directly impact a person's ability to keep or 

receive payments and/or the person's participation in the Medicaid program; 

e.g., exclusion from program participation, recoupment of overpayments, 

or payment hold. Imposition of sanctions triggers due process notice 

and hearing requirements.

1 TEX. ADMIN. CODE § 371.1603(j)(2) (eff. 1/9/2005) (emphasis added). 
6

The Inspector General affords, to any provider1 or person against 

whom it imposes sanctions, all administrative and judicial due process 

remedies applicable to administrative sanctions. 

1 TEX. ADMIN. CODE § 371.1667(a) (eff. 1/9/2005) (emphasis added). Upon the 

Inspector General’s final determination of a sanction against a provider, such as a 

pharmacy, the Inspector General must provide written notice to the provider of its 

right to a formal appeal hearing. 1 TEX. ADMIN. CODE § 371.1647(c) and (d)(5) 

(eff. 1/9/2005). 

 “The provider . . . may choose to request an informal review, a formal 

appeal hearing, or both.” 1 TEX. ADMIN. CODE § 371.1667(b) (eff. 1/9/2005).2

 

This “formal appeal hearing” clearly sets forth the type of “contested case” subject 

to the procedural requirements of the Administrative Procedures Act. TEX. GOV’T 

CODE § 2001.003(1). Moreover, the resolution of such a contested case would 

afford the provider an opportunity for judicial review. TEX. GOV’T CODE

§2001.171.3

 1

 Pharmacies in the Vendor Drug Program meet the definition of “providers” under 

Subchapter G. 1 TEX. ADMIN. CODE § 371.1601(41) (eff. 1/9/2005) (defining “provider” as 

including person providing services to an HHS agency); 1 TEX. ADMIN. CODE § 371.1601(18) 

(eff. 1/9/2005) (defining “HHS” as including the Commission and any other program or division 

under the Commission’s umbrella). 

2

 Upon receiving a provider’s notice of appeal, the Inspector General must then “forward 

the notice of appeal to the Commission’s Office of General Counsel for docketing.” 1 TEX.

ADMIN. CODE § 371.1669(a) (eff. 1/9/2005). 

3

 This amicus brief focuses on the regulations in effect at the time that HHSC-OIG issued 

its administrative sanction against Appellant. The regulations in effect today likewise provide 
7

C. A Right to Formal Appeal Hearing Does Not Require an Allegation of 

 Fraud. 

 The right to appeal an administrative sanction is not dependent on an 

allegation of fraud. See 1 TEX. ADMIN. CODE § 371.1601(33) (eff. 1/9/2005) (“Any 

funds received greater than that to which the provider is entitled, whether obtained 

through error, misunderstanding, abuse, or fraud is considered to be an 

overpayment”); see also 1 TEX. ADMIN. CODE § 371.1603(f) (eff. 1/9/2005) (“Not 

all actions resulting in overpayment to a provider are necessarily fraudulent.”); 1 

TEX. ADMIN. CODE § 371.1613 (eff. 1/9/2005) (“Unintentional program violations 

are subject to administrative actions and sanctions.”). Most program violations 

which result in an allegation of overpayment do not result in the pharmacy 

provider receiving more compensation than was otherwise due. For example, often 

HHSC-OIG makes a claim for overpayment as a result of a prescription not being 

dated, a telephonic refill not being noted on the original prescription, or a quantity 

not being written on the prescription in both word and numeric form (i.e., “thirty 

(30) tablets”). Each of these types of alleged errors do not result in the patient 

receiving more medicine than he or she should have or the pharmacy being paid 

more than it should have. However, HHSC-OIG still claims each to be an 

“overpayment.” 

 

for due process through notice and a formal hearing. See 1 TEX. ADMIN. CODE § 371.1719(d)(4) 

and its predecessor 1 TEX. ADMIN. CODE § 371.1709(h) (eff. 4/10/11). 
8

 Therefore, it is not sufficient to claim that only those charged with fraud 

may obtain an informal appeal hearing. 

CONCLUSION

For the foregoing reasons, Amicus American Pharmacies respectfully 

requests that the Court receive this brief and consider the arguments raised herein. 

Respectfully submitted, 

TAYLOR DUNHAM AND RODRIGUEZ, LLP 

301 Congress Avenue, Suite 1050 

Austin, Texas 78701 

Telephone: (512) 473-2257 

Telecopier: (512) 478-4409 

 

By: /s/ Miguel S. Rodriguez 

 Miguel S. Rodriguez 

 State Bar No. 24007938 

mrodriguez@taylordunham.com

 

ATTORNEYS FOR SOUTHWEST 

PHARMACY SOLUTIONS, INC. d/b/a 

AMERICAN PHARMACIES 

 
9

CERTIFICATE OF COMPLIANCE

In compliance with T.R.A.P. 9.4(i)(2), this brief contains 1,602 words, 

excluding the portions of the brief exempted by Rule 9.4(i)(l). 

/s/ Miguel S. Rodriguez 

Miguel S. Rodriguez 

CERTIFICATE OF SERVICE

This is to certify that a copy of the foregoing document was served on all 

counsel of record by delivering a true and correct copy via electronic service and 

U.S. First Class Mail on this the 12th day of January, 2015, as follows: 

Jeff Avant 

Avant & Mitchell, L.P. 

700 Lavaca, Suite 1400 

Austin, Texas 78701 

(512) 478-5757 Telephone 

(512) 478-5404 Facsimile 

avantlaw@swbell.net

 and 

Hugh Barton 

Hugh M. Barton, P.C. 

603 West 13th St., Ste 1B 

Austin, Texas 78701 

(512) 499-0793 Telephone 

(512) 727-6717 Facsimile 

bartonlaw@yahoo.com

Attorneys for Appellant 

Ann Hartley 

Assistant Attorney General of the 

Financial, 

Tax and Litigation Section or the Texas 

Office of the Attorney 

General 

P.O. Box 12548 

Austin, Texas 78711-2548 

(512) 936-1313 Telephone 

(512) 477-2348 Facsimile 

ann.hartley@texasattorneygeneral.gov

Attorneys for Appellees 

 /s/ Miguel S. Rodriguez 

 Miguel S. Rodriguez 
10

APPENDIX

Tab 1 1 TEX. ADMIN. CODE § 371.1601 (eff. 1/9/2005) 

Tab 2 1 TEX. ADMIN. CODE § 371.1603 (eff. 1/9/2005) 

Tab 3 1 TEX. ADMIN. CODE § 371.1613 (eff. 1/9/2005) 

Tab 4 1 TEX. ADMIN. CODE § 371.1643 (eff. 1/9/2005) 

Tab 5 1 TEX. ADMIN. CODE § 371.1647 (eff. 1/9/2005) 

Tab 6 1 TEX. ADMIN. CODE § 371.1667 (eff. 1/9/2005) 

Tab 7 1 TEX. ADMIN. CODE § 371.1669 (eff. 1/9/2005) 
APPENDIX

Tab 1 

1 TEX. ADMIN. CODE § 371.1601 (eff. 1/9/2005) 

 
1/9/2015 Texas Administrative Code

http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118663&p_tloc=&p_ploc=&pg=1&p_tac=118663&ti=1&pt=15&c... 1/5

<<Back

Historical Rule for the Texas Administrative Code

TITLE 1 ADMINISTRATION

PART 15 TEXAS HEALTH AND HUMAN SERVICES COMMISSION

CHAPTER 371 MEDICAID AND OTHER HEALTH AND HUMAN SERVICES FRAUD

AND ABUSE PROGRAM INTEGRITY

SUBCHAPTER G LEGAL ACTION RELATING TO PROVIDERS OF MEDICAL

ASSISTANCE

DIVISION 1 FRAUD OR ABUSE AND ADMINISTRATIVE ENFORCEMENT

INVOLVING MEDICAID AND OTHER HEALTH AND HUMAN

SERVICES PROGRAMS

RULE §371.1601 Definitions

Repealed Date: 10/14/2012

The following words and terms, when used in this subchapter, shall have the following meanings, unless

the context clearly indicates otherwise.

(1) Abuse­­Practices that are inconsistent with sound fiscal, business, or medical practices and that

result in unnecessary program cost or in reimbursement for services that are not medically necessary; do

not meet professionally recognized standards for health care; or do not meet standards required by

contract, statute, regulation, previously sent interpretations of any of the items listed, or authorized

governmental explanations of any of the foregoing.

(2) Affiliates­­Persons associated with one another so that any one of them directly or indirectly

controls or has the power to control another in whole or in part or meets any portion of the definition for

"Affiliate Relationship" established at §371.1643 of this subchapter relating to Use of Sanctions.

(3) Agent­­Any person, company, firm, corporation, employee, independent contractor, or other entity

or association legally acting for or in the place of another person or entity.

(4) At the time of the request­­A requirement to produce requested records immediately upon request

and without delay.

(5) CHIP­­Children's Health Insurance Program.

(6) Claim­­Requests for payment or reimbursement related to services or items delivered within the

Medicaid or other HHS programs, which are submitted by a provider to the Medicaid or other HHS

program claims administrator or an operating agency either directly by a provider or indirectly through a

managed care organization.

(7) Claims Administrator­­The entity designated by an operating agency to process and pay Medicaid

provider claims.

(8) Closed­end Contract­­A contract or provider agreement for a specific period of time. It may include

any specific requirements or provisions deemed necessary by the Inspector General to ensure the

protection of the program. It must be renewed for the provider to continue to participate in the Medicaid
1/9/2015 Texas Administrative Code

http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118663&p_tloc=&p_ploc=&pg=1&p_tac=118663&ti=1&pt=15&c... 2/5

or other HHS program.

(9) Commission­­The Texas Health and Human Services Commission.

(10) Controlled substances­­"Controlled substance" as defined by the Texas Controlled Substances Act

(Texas Health and Safety Code, Chapter 481) or its successor and the Federal Controlled Substances Act

(21 USCA §8.01 et seq.) or its successor.

(11) Conviction or convicted­­A person is considered to have been convicted when:

(A) A judgment of conviction has been entered against an individual or entity by a federal, state, or

local court, regardless of whether:

(i) There is a post­trial motion or an appeal pending, or

(ii) The judgment of conviction or other record relating to the criminal conduct has been expunged

or otherwise removed;

(B) A federal, state, or local court has made a finding of guilty against an individual or entity;

(C) A federal, state, or local court has accepted a plea of guilty or nolo contendere by an individual or

entity; or

(D) An individual or entity has entered into participation in a first offender, deferred adjudication or

other program or arrangement where judgment of conviction has been withheld.

(12) Exclusion­­Means that items or services furnished, ordered, or prescribed by a specified individual

or entity will not be reimbursed under Medicare, Medicaid and all other state health and human services

programs until the individual or entity is reinstated by the Inspector General. When excluded, any

provider participation contract/agreement with the excluded person or in which the excluded person is

affiliated that entitles that person to participate as a provider or contractor, due to the enrollment

process, is canceled. The cancellation would not apply to any settlement agreements or agreements for

other purposes that were signed by the provider or contractor. An excluded provider ceases to be a

"provider", as defined in this section, upon the effective date of their exclusion, thus for purposes of this

subchapter, they become a "person", as defined in this section.

(13) Failure to grant immediate access­­The failure to grant access to records, documents, or premises,

upon reasonable request and as requested, for the purpose of reviewing, examining, and securing

custody of records, access to, disclosure of, and custody of copies or originals of any records,

documents, or other requested items, and others specified in §371.1643(f) of this subchapter, as

determined necessary by the Inspector General or those specified in §371.1643(f) of this subchapter to

perform statutory functions. Further definition and clarification is provided in §371.1643(f) and

§371.1617(2) of this subchapter.

(14) False statement or misrepresentation­­Any statement or representation that is inaccurate,

incomplete, or not true.

(15) Federal financial participation (FFP)­­The federal government's share of a state's expenditures

under the Medicaid and other HHS programs and other benefit programs.

(16) Fraud­­Any act that constitutes fraud under applicable federal or state law, including any

intentional deception or misrepresentation made by a person with the knowledge that the deception
1/9/2015 Texas Administrative Code

http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118663&p_tloc=&p_ploc=&pg=1&p_tac=118663&ti=1&pt=15&c... 3/5

could result in some unauthorized benefit to that person or some other person.

(17) Health Maintenance Organization (HMO)­­A public or private organization organized under state

law that is a federally qualified HMO or that meets the definition of HMO within this state's Medicaid

plan.

(18) HHS­­A health and human service agency under the umbrella of the Health and Human Services

Commission (the Commission), including the Commission, a program or service provided under the

authority of the Commission or a health and human service agency, including those agencies delineated

in §531.001.

(19) Immediate Access­­Is deemed to include the provisions established by §371.1617(2) and

§371.1643(f) of this subchapter.

(20) Immediate family member­­A person's spouse (husband or wife); natural or adoptive parent; child

or sibling; stepparent, stepchild, stepbrother or stepsister; father­, mother­, daughter­, son­, brother­ or

sister­in­law; grandparent or grandchild; or spouse of a grandparent or grandchild.

(21) Indirect ownership interest­­Includes an ownership interest through any other entities that

ultimately have an ownership interest in the provider or person, as defined in this section, at issue. (For

example, an individual has a 10 percent ownership interest in the entity at issue if they have a 20 percent

ownership interest in a corporation that wholly owns a subsidiary that is a 50 percent owner of the entity

at issue.)

(22) Inducement­­An attempt to entice or lure an action on the part of another in exchange for, without

limitation, a service, cash in any amount, entertainment, or any item of value.

(23) Inpatient institutional services­­Inpatient services provided by hospitals and long­term care

facilities.

(24) Licensing authority adverse action­­Any action by a state or federal licensing entity (including

other similar authority) against conduct that adversely affects the status of the license. Action includes

revocation or suspension of a license as well as reprimand, censure, or probation.

(25) Managed Care Organization (MCO)­­Any person that is authorized or otherwise permitted by law

to arrange for or provide a managed care plan.

(26) Managed Care Plan­­A plan under which a person undertakes to provide, arrange for, pay for, or

reimburse any part of the cost of any health care service. A part of the plan must consist of arranging for

or providing health care services on a prepaid basis through insurance or otherwise, as distinguished

from indemnification against the cost of those services.

(27) Medicaid Fraud Control Unit (MFCU)­­The division within the attorney general's office that is

responsible for investigating suspected Medicaid provider fraud and physical abuse or neglect of

patients in institutional settings.

(28) Medicaid Provider Integrity Division (MPI)­­The division within the Commission's Office of

Inspector General (OIG) that investigates provider or contractor fraud and abuse in Medicaid and other

HHS programs.

(29) Member of Household­­With respect to a person, as defined in this section, with whom they are

sharing a common abode as part of a single­family unit, including domestic employees, partners, and
1/9/2015 Texas Administrative Code

http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118663&p_tloc=&p_ploc=&pg=1&p_tac=118663&ti=1&pt=15&c... 4/5

others who live together as a family unit.

(30) Office of Inspector General (OIG)­­The office within the Commission responsible for the

investigation of fraud and abuse and with ensuring program integrity within the Texas Medicaid

program and other health and human services provided by the state and the enforcement of state law

relating to the provision of those services.

(31) Open­end Provider Agreement­­An agreement that has no specific termination date and continues

in force as long as both parties agree.

(32) Operating agency­­A state agency that operates any part of the Texas Medicaid or other HHS

program.

(33) Overpayment­­The amount paid by Medicaid or other HHS program to a provider or person that

exceeds the amount to which the provider or person is entitled under §1902 of the Social Security Act or

other state or federal statutes for a service or item furnished within the Medicaid or other HHS

programs, and that is required to be refunded under §1903 of the Social Security Act or any other

statute. This also includes all overpayments specified in division 5 of this subchapter. Any funds

received greater than that to which the provider is entitled, whether obtained through error,

misunderstanding, abuse, or fraud is considered to be an overpayment.

(34) Ownership interest­­An interest in the capital, the stock or the profits of the entity or any

mortgage, deed, trust or note, or other obligation secured in whole or in part by the property or assets of

the person, as defined in this section.

(35) Payment Hold (Suspension of Payments)­­An administrative sanction that withholds all or any

portion of payments due a provider until the matter in dispute, including all investigation and legal

proceedings, between the provider and the Commission or an operating agency or its agent(s) are

resolved. This is a temporary denial of reimbursement under the Medicaid or other HHS program for

items or services furnished by a specified provider.

(36) Person­­An individual, firm, association, partnership, corporation, agency, institution, or other

organization or legal entity.

(37) Probationary Contract­­A contract or provider agreement for any period of time. It may include

any special requirements or provisions deemed necessary by the Inspector General to ensure the

protection of the program. It must be renewed by the Inspector General for the provider to continue to

participate in the program.

(38) Practitioner­­A physician or other individual licensed or certified under state law to practice their

profession.

(39) Professionally Recognized Standards of Health Care­­Statewide or national standards of care,

whether in writing or not, that professional peers of the individual or entity whose provision of care is an

issue, recognize as applying to those peers practicing or providing care within the State of Texas. When

the Food and Drug Administration (FDA), the Centers for Medicare and Medicaid Services (CMS), or

the Public Health Service (PHS), has declared a treatment modality not to be safe and effective, persons

who employ such a treatment modality will be deemed not to meet professionally recognized standards

of health care. This definition shall not be construed to mean that all other treatments meet

professionally recognized standards.

(40) Program Violation­­A failure to comply with a Medicaid or other HHS provider contract or
1/9/2015 Texas Administrative Code

http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118663&p_tloc=&p_ploc=&pg=1&p_tac=118663&ti=1&pt=15&c... 5/5

agreement, the Texas Medicaid Provider Procedures Manual or other official program publications or

any state or federal statute or regulation applicable to the Texas Medicaid or other HHS program,

including any official written explanation or interpretation of the above. Fraud and abuse are program

violations, but not all program violations are included in fraud and abuse. Program violations are

delineated in §371.1617 of this subchapter (relating to Program Violations).

(41) Provider­­

(A) Any person or legal entity, including a managed care organization and their subcontractors,

furnishing Medicaid or other HHS services under a provider agreement or contract in force with a

Medicaid or other HHS operating agency, and who has a provider number issued by the Commission or

by any HHS agency or program or their designee to:

(i) provide medical assistance, Medicaid, or any other HHS service in any HHS program under

contract or provider agreement with the Commission, its designee, or a health and human service

agency; or

(ii) provide third­party billing services under a contract or provider agreement with the Commission

or its designee.

(B) An excluded provider ceases to be a "provider," as defined in this section, upon the effective date

of their exclusion, thus for purposes of this subchapter, they become a "person", as defined in this

section.

(42) Provisional Contract­­A contract or provider agreement for any period of time. It may include any

special requirements or provisions deemed necessary by the Inspector General to ensure the protection

of the program. It must be renewed by the Inspector General for the provider to continue to participate

in the program.

Cont'd...

Next Page Previous Page

| | |
1/9/2015 Texas Administrative Code

http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=T&app=3&p_dir=F&p_rloc=118663&p_tloc=14868&p_ploc=1&pg=2&p_tac=118663&ti=1&... 1/3

<<Back

Historical Rule for the Texas Administrative Code

TITLE 1 ADMINISTRATION

PART 15 TEXAS HEALTH AND HUMAN SERVICES COMMISSION

CHAPTER 371 MEDICAID AND OTHER HEALTH AND HUMAN SERVICES FRAUD

AND ABUSE PROGRAM INTEGRITY

SUBCHAPTER G LEGAL ACTION RELATING TO PROVIDERS OF MEDICAL

ASSISTANCE

DIVISION 1 FRAUD OR ABUSE AND ADMINISTRATIVE ENFORCEMENT

INVOLVING MEDICAID AND OTHER HEALTH AND HUMAN

SERVICES PROGRAMS

RULE §371.1601 Definitions

Repealed Date: 10/14/2012

(43) Reasonable request­­A request for the provider or person to provide original records and

documents, or copies of original records and documents, or access to records, documents, or premises,

as specified in §371.1643(f) of this subchapter, made by a properly identified agent of the Commission

or another state or federal agency identified in §371.1643(f) of this subchapter, during hours that the

business or premises is open for business.

(44) Recipient­­A person eligible for and covered by the Medicaid or any other HHS program.

(45) Recoupment of overpayment­­A sanction imposed to recover funds paid to the provider or person

to which they were not entitled. Recoupment of overpayments may be accomplished through a lump

sum or monthly payments by the provider or person to the Inspector General or, with the approval of the

Inspector General, a provider's or person's payments may be reduced by a percentage, up to 100% of

payments, to apply the unpaid funds to offset the overpayment owed. The recoupment will apply to all

previously submitted, pending, and subsequently submitted claims to offset overpayments previously

made to the provider or person. Some HHS programs may not have the full range of recoupment

options.

(46) Requesting Agency­­A governmental agency (or its authorized representative or agent) that is

authorized to review and reasonably is asking to see a provider's documentation or records or that is

directed or otherwise authorized by federal or state statute to review medical records and/or other

documentation that providers must maintain and disclose to such agencies in order to participate in the

or other HHS program and records and documents necessary for the Office of Inspector General to

fulfill its statutory mandates to review and investigate providers and persons for fraud and abuse; e.g.,

the Commission, the relevant operating agency, Texas Attorney General's Medicaid Fraud Control Unit,

U.S. Department of Health and Human Services. See also the definition for "Reasonable Request" listed

in paragraph (43) of this section.

(47) Restricted reimbursement­­An administrative sanction that limits or denies payment of a

provider's Medicaid or other HHS program claims for specific procedures for a specified time period for

services that the provider has abused or has billed inappropriately. The provider may be eligible to be

paid for certain other services.

(48) Services­­The types of medical assistance specified in section 1905(a) of the Social Security Act
1/9/2015 Texas Administrative Code

http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=T&app=3&p_dir=F&p_rloc=118663&p_tloc=14868&p_ploc=1&pg=2&p_tac=118663&ti=1&... 2/3

(42 U.S.C. §1396d (a)) and other HHS program services authorized under federal and state statutes that

are administered by the Commission and other HHS agencies.

(49) Social Security Act­­Legislation passed by Congress in 1965 that established the Medicaid

program under Title XIX and created, in the same legislation, the Medicare program under Title XVIII.

(50) Solicitation­­Offering to pay or agreeing to accept, directly or indirectly, overtly or covertly any

remuneration in cash or in kind to or from another for securing or soliciting a patient or patronage for or

from a person licensed, certified, or registered or enrolled as a provider or otherwise by a state health

care regulatory or health and human service agency.

(51) State health care program­­Any program that has:

(A) A state plan approved under Title XIX of the Social Security Act (Medicaid);

(B) Any program receiving funds under Title V of the Act or from an allotment to a State under such

title (Maternal and Child Health Services Block Grant program); or

(C) Any program receiving funds under Title XX of the Act or from any allotment to a State under

such title (Block Grants to States for Social Services).

(52) Subcontractor­­Means:

(A) an individual, agency or organization to which a disclosing entity (provider) has contracted or

delegated some of its management functions or responsibilities of providing medical care or other

services to its patients or recipients; or

(B) an individual, agency or organization with which a fiscal agent has entered into a contract,

agreement, purchase order, or lease to obtain space, equipment, or services provided under the Medicaid

or other HHS agreement or contract.

(53) Suspension of payments (payment hold)­­The withholding of all or any portion of payments for

items or services furnished by a specified provider and due a provider until the matter in dispute

between the provider and the Commissioner agent is resolved.

(54) Title XVIII­­Title XVIII (Medicare) of the Social Security Act.

(55) Title XIX­­Title XIX (Medicaid) of the Social Security Act.

(56) Title XX­­Social Services Block Grant of the Social Security Act.

(57) Waste­­Practices that spend carelessly and /or allow inefficient use of resources, items, or

services.

Source Note: The provisions of this §371.1601 adopted to be effective January 9, 2005, 29 TexReg

12128

Next Page Previous Page

| | |
APPENDIX

Tab 2 

1 TEX. ADMIN. CODE § 371.1603 (eff. 1/9/2005) 

 
1/9/2015 Texas Administrative Code

http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118664&p_tloc=&p_ploc=&pg=1&p_tac=118664&ti=1&pt=15&c... 1/3

<<Back

Historical Rule for the Texas Administrative Code

TITLE 1 ADMINISTRATION

PART 15 TEXAS HEALTH AND HUMAN SERVICES COMMISSION

CHAPTER 371 MEDICAID AND OTHER HEALTH AND HUMAN SERVICES FRAUD

AND ABUSE PROGRAM INTEGRITY

SUBCHAPTER G LEGAL ACTION RELATING TO PROVIDERS OF MEDICAL

ASSISTANCE

DIVISION 1 FRAUD OR ABUSE AND ADMINISTRATIVE ENFORCEMENT

INVOLVING MEDICAID AND OTHER HEALTH AND HUMAN

SERVICES PROGRAMS

RULE §371.1603 Overview of Inspector General Responsibility Relating to Investigation,

Referral and Administrative Enforcement in Medicaid and Other Health and

Human Services Programs

Repealed Date: 10/14/2012

(a) The Office of Inspector General (the Inspector General) is responsible for minimizing the

opportunity for provider or contractor fraud, abuse, overpayments, and waste within the Medicaid and

other HHS programs, whether the fraud or abuse was committed by providers, recipients, or other

persons and for protecting recipients of federally funded programs from unsafe practitioners.

(b) The Inspector General may take appropriate action as authorized in subchapters A, B, and G of this

chapter to protect recipients and the programs when persons have committed, or are suspected of

committing, fraud or abuse. Such actions may include administrative actions and/or sanctions and

referral to appropriate law enforcement agencies for criminal investigation.

(c) The Inspector General may take action against any provider or person associated with any HHS

program or service as it relates to fraud, abuse, overpayments, waste, or program violations that rise to

the level of fraud, abuse, or waste of those HHS programs or services, or for any of the violations for

which the Inspector General may take action against providers or persons associated with the Medicaid

program, as described in this subchapter.

(d) The Inspector General may take an administrative action, sanction, impose damages or penalties, or

abate, deny, or postpone a decision to enroll a provider or person in the Medicaid program, based upon

an investigation or finding in the Medicaid or other HHS programs.

(e) The Inspector General may also take an administrative action, sanction, impose damages or

penalties, or abate, deny, or postpone a decision to enroll a provider or person in a Medicaid program or

for a Medicaid service, based upon the investigative findings related to an investigation or finding of a

provider or person or their principals or affiliates within a Medicaid or HHS program or receiving a

Medicaid or HHS service.

(f) Not all actions resulting in overpayment to a provider are necessarily fraudulent. Some circumstances

could result in the referral of a Medicaid provider to the Attorney General's Medicaid Fraud Control

Unit or Civil Fraud Division. Other circumstances could result in administrative action rather than

referral for judicial action or criminal prosecution. These actions, or sanctions, could range from an

educational notice to the provider explaining their error, to contract cancellation and/or exclusion from
1/9/2015 Texas Administrative Code

http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118664&p_tloc=&p_ploc=&pg=1&p_tac=118664&ti=1&pt=15&c... 2/3

participation in the Medicaid (Title XIX), Title XX, and Title V programs.

(g) Investigation. When the Inspector General receives information regarding a possible program

violation either from its review systems or through a complaint or referral filed by another agency or

person, the Inspector General initiates an investigation. After completing its preliminary investigation,

the Inspector General may, at its discretion, initiate settlement discussions with the person who is the

subject of the investigation. If the matter cannot reasonably be settled or if the Inspector General

determines that further investigation is required before the propriety of settlement or other enforcement

can be evaluated, the Inspector General may conduct a full investigation of the case.

(h) An Inspector General case remains open until the investigation is complete, the case is reasonably

settled, the Inspector General makes an administrative determination that closes the case for lack of

evidence or appropriate administrative enforcement, and/or legal action is completed. At any time

during the investigative or enforcement process, the Inspector General maintains the authority to settle

administrative cases, impose payment holds, or request the Office of the Attorney General to obtain an

injunction to prevent a person from disposing of an asset identified by the OIG as potentially subject to

recovery by the OIG due to the person's fraud or abuse.

(i) Referral for Legal Action. The Inspector General refers all cases of suspected Medicaid fraud or

patient abuse or neglect to the Medicaid Fraud Control Unit (MFCU) or the Civil Fraud Division (CFD)

at the Office of the Attorney General (OAG) for investigation regarding the need for criminal or civil

prosecution. If the MFCU fails to act on a matter within 30 days of receiving a referred case from the

Inspector General or returns a case to the Inspector General without initiating prosecution, the Inspector

General may refer the matter to an appropriate prosecuting authority or a collection agency. Nothing in

these rules is intended to prevent concurrent administrative, civil, and/or criminal investigation and

action regarding suspected fraud or patient abuse or neglect. Subject to express statutory limitations, the

Inspector General may proceed with recoupment and/or administrative enforcement concurrently with

judicial prosecution of the same matter.

(j) Administrative Enforcement. Based upon the nature and severity of the program violation, the

provider's previous history of violations, evidence of the provider's knowledge and intent, and other

relevant factors, the Inspector General may select enforcement measures from the three categories set

forth below and in more detail at Divisions 3 ­ 6 of this subchapter.

(1) Administrative Actions­­The Inspector General may impose an administrative action to provide

safeguards for future compliance or refer a matter for additional review or enforcement; e.g., education,

referral to licensing board, referral for judicial action. The imposition of administrative actions does not

give rise to due process notice or hearing requirements.

(2) Sanctions­­Sanctions may directly impact a person's ability to keep or receive payments and/or the

person's participation in the Medicaid program; e.g., exclusion from program participation, recoupment

of overpayments, or payment hold. Imposition of sanctions triggers due process notice and hearing

requirements.

(3) Damages and Penalties (formerly "Civil Monetary Penalties")­­The imposition of damages or

penalties for program violations (e.g., false claims, specified managed care acts or omissions) triggers

due process notice and hearing requirements.

Source Note: The provisions of this §371.1603 adopted to be effective January 9, 2005, 29 TexReg

12128
APPENDIX

Tab 3 

1 TEX. ADMIN. CODE § 371.1613 (eff. 1/9/2005) 

 
1/9/2015 Texas Administrative Code

http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118669&p_tloc=&p_ploc=&pg=1&p_tac=118669&ti=1&pt=15&c... 1/1

<<Back

Historical Rule for the Texas Administrative Code

TITLE 1 ADMINISTRATION

PART 15 TEXAS HEALTH AND HUMAN SERVICES COMMISSION

CHAPTER 371 MEDICAID AND OTHER HEALTH AND HUMAN SERVICES FRAUD

AND ABUSE PROGRAM INTEGRITY

SUBCHAPTER G LEGAL ACTION RELATING TO PROVIDERS OF MEDICAL

ASSISTANCE

DIVISION 2 MEDICAID PROGRAM AUTHORITY AND VIOLATIONS

RULE §371.1613 Program Authority

Repealed Date: 10/14/2012

When established by prima facie evidence, all Medicaid and other HHS program violations (defined at

§371.1617 of this subchapter) are subject to administrative enforcement and/or criminal or other

appropriate judicial action. The method of enforcement reflects the evidence of the intent of the noncompliant provider or person. Unintentional program violations are subject to administrative actions and

sanctions. Violations the provider or person knew or should have known were false and involved

program or patient abuse or fraud are also subject to administrative monetary penalties, as well as

criminal or other judicial prosecution. In accordance with 42 Code of Federal Regulations (CFR)

§455.13(a), the Inspector General has established methods and criteria for identifying suspected fraud

cases. Criteria to establish suspected fraud is based upon evidence of intentional deception or

misrepresentation or upon a program violation or violation of other governing statutory law, including

without limitation neglect, that appears to have been committed intentionally or with knowing and

willful disregard for program rules.

Source Note: The provisions of this §371.1613 adopted to be effective January 9, 2005, 29 TexReg

12128

Next Page Previous Page

| | |
APPENDIX

Tab 4 

1 TEX. ADMIN. CODE § 371.1643 (eff. 1/9/2005) 

 
1/9/2015 : Texas Register

http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=1&p_dir=&p_rloc=124206&p_tloc=&p_ploc=&pg=1&p_reg=124206&ti=1&pt=15... 1/6

Texas Register

TITLE 1 ADMINISTRATION

PART 15 TEXAS HEALTH AND HUMAN SERVICES COMMISSION

CHAPTER 371 MEDICAID AND OTHER HEALTH AND HUMAN SERVICES FRAUD AND

ABUSE PROGRAM INTEGRITY

SUBCHAPTER

G

LEGAL ACTION RELATING TO PROVIDERS OF MEDICAL ASSISTANCE

DIVISION 4 ADMINISTRATIVE SANCTIONS

RULE

§371.1643

Use of Sanctions

ISSUE 12/31/2004

ACTION Final/Adopted

Preamble No Rule Available

(a)In response to program violations in the Medicaid program, including but not limited to any

substantiated reason specified in §371.1617 of this subchapter, the Inspector General may impose

against a provider or person, as defined in §371.1601 of this subchapter, any one or combination of

sanctions specified in subsection (c) of this section.

(b)The imposition of an administrative action is not prerequisite to the use of a sanction, although

sanctions may be imposed in conjunction with other administrative enforcement measures.

(c)Administrative sanctions include:

(1)exclusion from participation in the Titles V, XIX (Medicaid), and XX programs for a specified

period of time, permanently, or indefinitely; (In this subchapter, exclusion from Medicaid automatically

precipitates concurrent exclusion from Titles V, and XX.)

(2)suspension of payments (payment hold) to a provider in Titles V, XIX (Medicaid), XX, and CHIP

programs;

(3)recoupment of overpayments in Titles V, XIX (Medicaid), and XX programs;

(4)recoupment of overpayments projected from a sampling process in Titles V, XIX (Medicaid), and

XX programs;

(5)restricted reimbursement for a specified period of time or indefinitely in Titles V, XIX (Medicaid),

and XX programs­­Specific services will not be reimbursed to an individual provider during the time the

provider is on restricted reimbursement; however, other services, as determined by the Inspector

General, will be reimbursed;

(6)cancellation of provider contract or provider agreement in Titles V, XIX (Medicaid), and XX,

programs; and

(7)debarment or suspension under the authority of the Code of Federal Regulations.
1/9/2015 : Texas Register

http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=1&p_dir=&p_rloc=124206&p_tloc=&p_ploc=&pg=1&p_reg=124206&ti=1&pt=15... 2/6

(d)Providers or Persons Subject to Sanctions.

(1)Providers or persons furnishing services or items directly or indirectly for the Medicaid program are

subject to sanctions for violations of the program;

(2)Any affiliates of a provider or person as specified in subsection (d) of this section.

(3)Providers or persons in violation of any of the violations set forth in Subchapter G of this chapter;

and

(4)Providers or persons committing other program violations for which the Inspector General

determines that sanctions are appropriate.

(e)Affiliate Relationship.

(1)A provider or person, as defined in §371.1601 of this subchapter, is deemed to have an affiliate

relationship with another provider or person, if they:

(A)have a direct or indirect ownership interest (or any combination thereof) of 5% or more in the

entity;

(B)are the owner of a whole or part interest in any mortgage, deed of trust, note or other obligation

secured (in whole or in part) by the entity or any of the property assets, thereof, in which whole or part

interest is equal to or exceeds 5% of the total property and assets of the entity;

(C)are an officer or director, if organized as a corporation;

(D)are a partner, if organized as a partnership;

(E)are an agent or consultant;

(F)are a managing employee, that is, a person (including a general manager, business manager,

administrator or director) who exercises operational or managerial control over a person or part thereof,

or directly or indirectly conducts the day­to­day operations of the entity or part thereof;

(G)are providers or person(s) associated with one another so that any one of them, directly or

indirectly, controls or has the power to control another in whole or in part;

(H)share any of the following: e.g. tax identification numbers, social security numbers, bank

accounts, telephone number, business location. (This is not an all inclusive list); or

(I)was formerly described in subsection (d)(1) of this section, but is no longer described, because of a

transfer of ownership or control interest to an immediate family member or a member of the person's

household as defined in subsection (d)(3) of this section, in anticipation of, or following a conviction,

assessment of damages or penalties under §371.1721 et seq. of this subchapter, or imposition of a

sanction.

(2)The Inspector General may sanction an affiliate of a provider or person, as defined in §371.1601 of

this subchapter, if a provider or person with an affiliate relationship:

(A)has been convicted of a criminal offense related to the Medicaid or Medicare program or as

described in §§1128(a) and 1128(b)(1), (2), or (3) of the Social Security Act, or of an offense related to
1/9/2015 : Texas Register

http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=1&p_dir=&p_rloc=124206&p_tloc=&p_ploc=&pg=1&p_reg=124206&ti=1&pt=15... 3/6

another HHS program;

(B)has had damages and penalties or assessments imposed under §371.1721 et seq. of this subchapter

or §1128A of the Social Security Act; or

(C)has been excluded from participation in Medicaid, Medicare, or any state's health care program.

(3)For purposes of this section, the following terms are defined as:

(A)Agent means any person who has express or implied authority to obligate or act on behalf of a

provider or person, as defined in §371.1601 of this subchapter.

(B)Immediate family member means, a person's husband, wife, or spouse; natural or adoptive parent;

child or sibling; stepparent, stepchild, stepbrother or stepsister; father­, mother­, daughter­, son­,

brother­ or sister­in­law; grandparent or grandchild; or spouse of a grandparent or grandchild.

(C)Indirect ownership interest includes an ownership interest through any other entities that

ultimately have an ownership interest in the provider or person in issue. (For example, an individual has

a 10 percent ownership interest in the entity at issue if they have a 20 percent ownership interest in a

corporation that wholly owns a subsidiary that is a 50 percent owner of the entity in issue.)

(D)Member of household means, with respect to a person, with whom they are sharing a common

abode as part of a single­family unit, including domestic employees, partners, and others who live

together as a family unit.

(E)Ownership interest means an interest in the capital, the stock or the profits of the entity or any

mortgage, deed, trust or note, or other obligation secured in whole or in part by the property or assets of

the person.

(f)Failure to Grant Immediate Access.

(1)The Inspector General may sanction any provider or person, including managed care organizations

and their subcontractors, as defined in §371.1601 of this subchapter, that:

(A)fails to grant immediate access upon reasonable request to:

(i)the Inspector General;

(ii)the Attorney General's Medicaid Fraud Control Unit or Civil Fraud Division;

(iii)any state or federal agency authorized to conduct compliance, regulatory, or program integrity

functions on the provider, person, or the services rendered by the provider or person; or

(iv)any agent or consultant of any agency or division within an agency formerly described in

subparagraph (A) of this paragraph;

(B)fails to allow the Inspector General or any other federal or state agency, division, agent or

consultant as described in subparagraph (A) of this paragraph to conduct any duties that are necessary to

the performance of their statutory functions;

(C)fails to provide to the Inspector General or any other federal or state agency, division, agent or

consultant as described in subparagraph (A) of this paragraph, upon request and as requested, for the
1/9/2015 : Texas Register

http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=1&p_dir=&p_rloc=124206&p_tloc=&p_ploc=&pg=1&p_reg=124206&ti=1&pt=15... 4/6

purpose of reviewing, examining, and securing custody of records, access to, disclosure of, and custody

of copies or originals of any records, documents, or other requested items, as determined necessary by

the Inspector General or those specified in subparagraph (A) of this paragraph to perform statutory

functions, any records the provider or person is required to maintain; any records necessary to verify

items or services furnished and delivered under Medicaid, any other HHS program, or any state health

care program to determine whether payment for those items or services is due or was properly made.

This includes, without limitation: clinical medical patient records, other records pertaining to the patient,

any other records of services provided to Medicaid or other HHS program recipients and payments

made for those services, documents related to diagnosis, treatment, service, lab results, charting, billing

records, invoices, documentation of delivery of items, equipment, or supplies, and radiographs and all

requirements of §371.1617(a)(2) of this subchapter. It also includes the business and accounting records

with backup support documentation, statistical documentation, computer records and data, patient sign

in sheets, and schedules. Accessible information must include information that is necessary for the

agencies specified in this paragraph to perform statutory functions. It includes those elements described

in §371.1601 of this subchapter (definition of "failure to provide immediate access").

(2) For purposes of paragraph (1)(A) and (1)(B) of this subsection, the term:

(A)Failure to grant immediate access means the failure to grant access at the time of a reasonable

request.

(B)Reasonable request means a request made by a properly identified agent of the Inspector General

or another state or federal agency identified in paragraph (1)(A) of this subsection, during hours that the

business or premises is open for business.

(3)For purposes of paragraph (1)(C) of this subsection, the term Failure to grant immediate access

means:

(A)The failure to produce or make available records within 24 hours of the request for production, for

the purpose of reviewing, examining, and securing custody of records upon reasonable request, as

determined by the requestor, Inspector General and all other state and federal agencies, except where the

Inspector General or another state or federal agency identified in paragraph (1)(A) of this subsection

reasonably believes that requested documents are about to be altered or destroyed or that the request

may be completed at the time of the request and/or in less than 24 hours;

(B)The failure to provide access to requested records at the time of the request, for the purpose of

reviewing, examining, and securing custody of records upon reasonable request, when the Inspector

General or another state or federal agency identified in paragraph (1)(A) of this subsection, has reason to

believe that requested documents are about to be altered or destroyed or the request, in the opinion of

the Inspector General or the other requestor, determined that the request could be met at that time and/or

in less than 24 hours.

(C)Reasonable request means a request for records or documents made by a properly identified agent

of the Inspector General or another state or federal agency identified in paragraph (1)(A) of this

subsection, during hours that the business or premises is open for business.

(4)In most instances, providers or persons required to produce records or documents will be required to

complete a Records Affidavit, Business Records Affidavit, Evidence Receipt, and/or Patient Record

Receipt, at the direction of the requestor, and to attach these documents to the records provided.

(5)As directed by the requestor, and in accordance with the provisions of subsection (e) of this section,
1/9/2015 : Texas Register

http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=1&p_dir=&p_rloc=124206&p_tloc=&p_ploc=&pg=1&p_reg=124206&ti=1&pt=15... 5/6

the provider or person will relinquish custody of the records and documents and the requestor will take

custody of the records and remove them from the premises. If the requestor should allow longer than "at

the time of the request" to produce the records, the provider or person will be required to produce all

records completed, at the time of completion or at the end of each day of production, as directed by the

requestor, to the requestor who will take custody of the records. Failure to comply with the provisions of

this part will result in a finding of Failure to grant immediate access.

(6)Nothing in this section shall in any way limit access otherwise authorized under State or Federal

law.

(7)Exclusion.

(A)A program exclusion imposed against a provider or person under this section may be for a period

equal to the sum of:

(i)The length of the period during which the immediate access was not granted, and

(ii)An additional period of up to one year.

(B)The exclusion of a provider or person may be for a longer period than the period in which

immediate access was not granted based on consideration of the following factors:

(i)The impact of the failure to grant the requested immediate access on Medicaid or other HHS

program;

(ii)The circumstances under which such access was refused; and

(iii)Whether the provider or person has a documented history of criminal, civil, or administrative

wrongdoing. The lack of any prior record is to be considered neutral.

(C)For purposes of this section, the length of the period in which immediate access was not granted

will be measured from the time the request is made.

(D)The exclusion will be effective as of the date immediate access was not granted.

(8)The Inspector General will work with the provider or person, within the limitations necessitated by

the circumstances of the investigative case, to provide the provider or person, within a reasonable time,

as determined by the Inspector General, and at the provider or person's expense, with copies of the

records necessary for the provider to continue their immediate business. Nothing herein shall be

interpreted to impede the Inspector General's or other requestor's ability to obtain all records and

documents as required and to which the requestor is entitled under this section.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a

valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 20, 2004

TRD­200407413

Steve Aragón

Chief Counsel
1/9/2015 : Texas Register

http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=1&p_dir=&p_rloc=124206&p_tloc=&p_ploc=&pg=1&p_reg=124206&ti=1&pt=15... 6/6

Texas Health and Human Services Commission

Effective date: January 9, 2005

Proposal publication date: June 18, 2004

For further information, please call: (512) 424­6900

Next Page Previous Page

Re­Query Register Back to List of Records

| | |
APPENDIX

Tab 5 

1 TEX. ADMIN. CODE § 371.1647 (eff. 1/9/2005) 

 
1/9/2015 : Texas Register

http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=1&p_dir=&p_rloc=124216&p_tloc=&p_ploc=&pg=1&p_reg=124216&ti=1&pt=15... 1/3

Texas Register

TITLE 1 ADMINISTRATION

PART 15 TEXAS HEALTH AND HUMAN SERVICES COMMISSION

CHAPTER 371 MEDICAID AND OTHER HEALTH AND HUMAN SERVICES FRAUD AND

ABUSE PROGRAM INTEGRITY

SUBCHAPTER

G

LEGAL ACTION RELATING TO PROVIDERS OF MEDICAL ASSISTANCE

DIVISION 4 ADMINISTRATIVE SANCTIONS

RULE

§371.1647

Notice of Sanction

ISSUE 12/31/2004

ACTION Final/Adopted

Preamble No Rule Available

(a)The Inspector General provides written notice of a potential sanction(s) by certified mail with return

receipt or by facsimile transmission with confirmation page. A recoupment requires both an initial

written notice of potential sanction and a subsequent written notice of final sanction; therefore, any

additional sanctions of any type in the same notice letter with a recoupment will require both notice

letters. Additional provisions regarding notice of an exclusion are provided in §371.1649 of this

subchapter. If there is no specific requirement in Subchapter G for a written notice of a potential

sanction for an individual specific situation, the only sanction notice letter required is the notice of final

sanction.

(b)Potential sanction. The written notice of potential sanction includes:

(1)a description of the potential sanction;

(2)the basis of the potential sanction;

(3)the effect of the potential sanction;

(4)its duration (duration could be indefinite or until a certain event occurred), if appropriate; and

(5)if the sanction is an exclusion, the notice must contain a description of the method the provider uses

to request reinstatement, unless the exclusion is permanent.

(c)In the case of a recoupment, a statement of the provider's or person's right to request a formal appeal

hearing of the potential sanction is not provided in the initial notice letter, since this is not a final

sanction. A statement of the provider's or person's right to request a formal appeal hearing of the final

sanction will be subsequently provided with the final written notice of the Inspector General's final

overpayment determination.

(d)Final sanction. The written notice of final sanction includes:

(1)a description of the final sanction;
1/9/2015 : Texas Register

http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=1&p_dir=&p_rloc=124216&p_tloc=&p_ploc=&pg=1&p_reg=124216&ti=1&pt=15... 2/3

(2)the basis of the final sanction;

(3)the effect of the final sanction;

(4)its duration (duration could be indefinite or until a certain event occurred), if appropriate;

(5)a statement of the provider's or person's right to request a formal appeal hearing of the sanction; and

(6)if the sanction is an exclusion, the notice must contain a description of the method the provider or

person uses to request reinstatement, unless the exclusion is permanent.

(e)The sanctions will take effect in the following manner:

(1)Recoupment­­The provider or person will receive a notice of a potential sanction to impose

recoupment. The provider or person may request an informal review, to informally discuss the issues

and allow the provider or person an opportunity to provide information they deem appropriate.

Subsequently, the Inspector General will make a final determination regarding the amount to be

recouped. Upon that determination, the Inspector General will send final determination and notice of

recoupment to the provider or person.

(2)Payment hold­­A payment hold on payments of future claims submitted for reimbursement will be

imposed, without prior notice, as specified in §371.1703(b) of this subchapter. The provider will be

notified of the payment hold not later than the fifth (5th) working day after the date the hold is imposed.

The payment hold will remain in effect until all issues regarding the provider's billing practices are

finally resolved, including all litigation and judicial processes.

(3)Restricted reimbursement­­The provider will receive final notice of intent to impose restricted

reimbursement unless the provider meets one of the exception criteria enumerated in §371.1649 and

§371.1651 of this subchapter. The provider may request an informal review and/or an administrative

appeal hearing as described in paragraph (1) of this subsection.

(4)Exclusion­­The provider or person will receive a notice of potential imposition of exclusion unless

the provider meets one of the exception criteria enumerated in §371.1649 and §371.1651 of this

subchapter. The provider or person may request an informal review, to informally discuss the issues and

allow the provider or person an opportunity to provide information they deem appropriate. This process

will occur before the Inspector General submits its final notice of exclusion to the provider or person. At

that time, the provider or person may request an administrative appeal hearing as described in

§371.1669 of this title.

(5)Cancellation of contract or provider agreement­­The provider or person will receive a notice of

potential cancellation of contract or provider agreement unless the provider meets one of the exception

criteria enumerated in §371.1649 and §371.1651 of this subchapter. The provider may request an

informal review as described in paragraph (1) of this subsection. This process will occur before the

Inspector General submits its final notice of cancellation of contract or provider agreement to the

provider or person. If a provider or person is excluded who also has a contract or provider agreement,

prior notice of the cancellation of contract or provider agreement is not a requirement, since the scope

and effect of the exclusion, as specified in §371.1673 of this subchapter, does not allow that person to

participate in Titles XIX, V, and XX programs. The contract or provider agreement in that instance

would be cancelled effective the effective date of the exclusion.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a

valid exercise of the agency's legal authority.
1/9/2015 : Texas Register

http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R&app=1&p_dir=&p_rloc=124216&p_tloc=&p_ploc=&pg=1&p_reg=124216&ti=1&pt=15... 3/3

Filed with the Office of the Secretary of State on December 20, 2004

TRD­200407413

Steve Aragón

Chief Counsel

Texas Health and Human Services Commission

Effective date: January 9, 2005

Proposal publication date: June 18, 2004

For further information, please call: (512) 424­6900

Next Page Previous Page

Re­Query Register Back to List of Records

| | |
APPENDIX

Tab 6 

1 TEX. ADMIN. CODE § 371.1667 (eff. 1/9/2005) 

 
1/9/2015 Texas Administrative Code

http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118696&p_tloc=&p_ploc=&pg=1&p_tac=118696&ti=1&pt=15&c... 1/1

<<Back

Historical Rule for the Texas Administrative Code

TITLE 1 ADMINISTRATION

PART 15 TEXAS HEALTH AND HUMAN SERVICES COMMISSION

CHAPTER 371 MEDICAID AND OTHER HEALTH AND HUMAN SERVICES FRAUD

AND ABUSE PROGRAM INTEGRITY

SUBCHAPTER G LEGAL ACTION RELATING TO PROVIDERS OF MEDICAL

ASSISTANCE

DIVISION 4 ADMINISTRATIVE SANCTIONS

RULE §371.1667 Due Process for Administrative Sanctions

Repealed Date: 10/14/2012

(a) The Inspector General affords, to any provider or person against whom it imposes sanctions, all

administrative and judicial due process remedies applicable to administrative sanctions.

(b) The person is also offered, in the sanction notice letter, an opportunity to request an informal review

of the imposition of sanction. The provider or person is given an opportunity to submit documentary

evidence and written argument concerning whether the sanction is warranted and other related issues. A

submission of documentary evidence or written argument does not guarantee it will be sufficient to rise

to the level of acceptable evidence or argument. If, upon review by the Inspector General, the

documentary evidence or written argument remains unacceptable, the Inspector General may proceed

with imposition of administration sanctions. The provider or person may choose to request an informal

review, a formal appeal hearing, or both. If both an informal review and formal appeal hearing are

chosen, the formal appeal hearing and all pertinent discovery, prehearing conferences, and all other

issues and activities regarding the formal appeal hearing will be abated until all informal review

discussions have ended without settlement or resolution of the issues. In certain situations, the informal

review will not be offered.

(c) When the exclusion is based on the existence of a criminal conviction, a civil fraud finding, a civil

judgment imposing liability by federal, state, or local court, a determination by another government

agency or board, any other prior determination, or provisions within a settlement agreement, the basis

for the underlying determination is not reviewable and the individual or entity may not collaterally

attack the underlying determination, either on substantive or procedural grounds, in an administrative

appeal.

Source Note: The provisions of this §371.1667 adopted to be effective January 9, 2005, 29 TexReg

12128

Next Page Previous Page

| | |
APPENDIX

Tab 7 

1 TEX. ADMIN. CODE § 371.1669 (eff. 1/9/2005) 
1/9/2015 Texas Administrative Code

http://texreg.sos.state.tx.us/public/readtac$ext.TacPage?sl=R&app=3&p_dir=&p_rloc=118697&p_tloc=&p_ploc=&pg=1&p_tac=118697&ti=1&pt=15&c... 1/1

<<Back

Historical Rule for the Texas Administrative Code

TITLE 1 ADMINISTRATION

PART 15 TEXAS HEALTH AND HUMAN SERVICES COMMISSION

CHAPTER 371 MEDICAID AND OTHER HEALTH AND HUMAN SERVICES FRAUD

AND ABUSE PROGRAM INTEGRITY

SUBCHAPTER G LEGAL ACTION RELATING TO PROVIDERS OF MEDICAL

ASSISTANCE

DIVISION 4 ADMINISTRATIVE SANCTIONS

RULE §371.1669 Notice of Appeal

Repealed Date: 10/14/2012

(a) To appeal a final sanction imposed by the Inspector General, a provider or person shall file a written

request for appeal with the Inspector General within twenty (20) calendar days of the date of the

person's receipt of the notice of final sanction, unless specified otherwise in other sections of this

subchapter. The Inspector General will then forward the notice of appeal to the Commission's Office of

General Counsel for docketing. If an informal review has also been requested, the appeal will be abated

until all efforts to resolve or settle the sanction have been unsuccessful. At the conclusion of the

informal review process, the Inspector General will then forward the notice of appeal to the

Commission's Office of General Counsel for docketing.

(b) The letter requesting an appeal hearing or informal review will contain a statement as to the specific

issues, findings, and/or legal authority in the notice letter with which the sanctioned provider or person

disagrees, and the basis for their contention that the specific issues or findings and conclusions are

incorrect. The request for a hearing must be made in writing to the Manager of Sanctions. The request

must be signed by the provider or person sanctioned or by their attorney and sent by certified mail to

arrive in Sanctions by the filing deadline. No other person or party may appeal for or on behalf of the

sanctioned provider or person.

Source Note: The provisions of this §371.1669 adopted to be effective January 9, 2005, 29 TexReg

12128

Next Page Previous Page

| | |