After years of criticism that it is soft on fraud, the Minnesota Department of Human Services has dramatically intensified efforts to combat illegal overbilling in the state’s publicly funded health insurance program.

The agency more than doubled its recoveries last year from health care providers who billed for services not rendered and other improper billing practices. Recoveries from fraud and overpayments totaled $3.9 million last year, up from $1.8 million in 2013, according to recent DHS data.

The surge in recoveries reflects a broader shift at DHS, the state’s largest agency, toward heightened oversight of doctors, pharmacies, home caregivers and others that bill the state-federal Medicaid program for services delivered to more than 1 million poor and disabled Minnesotans. For years, the agency has been chided for lax supervision, particularly in cases where elderly and disabled people receive care at home.

Because of Medicaid’s massive size — it is the biggest program in Minnesota government, with outlays of nearly $9 billion last year — even modest recoveries can add up to large sums.

With little fanfare, the DHS Office of Inspector General has undertaken the broadest expansion of its powers since being created four years ago. The office has doubled the size of its fraud investigative unit, from seven to 14 staff; launched an intensive effort to conduct hundreds of unannounced, on-site screenings of Medicaid providers; and has initiated fingerprint background checks on tens of thousands of health care and social service workers statewide.

The office is on pace this year to refer a record number of Medicaid fraud cases, more than 110, to the state attorney general’s office for possible prosecution.

“We are trying to hit on all cylinders,” said DHS Inspector General Jerry Kerber. “It’s a recognition that more ought to be done to [check on providers] before we start shipping out boatloads of money.”

The increased surveillance, however, has revealed a disturbing level of fraud and abuse within the insurance program, known in Minnesota as Medical Assistance. Of roughly 250 on-site screening visits completed this year, the agency has found enough cause for suspicion to refer 67 providers — or 27 percent of those screened — to the agency’s fraud investigative unit. Some of the providers were home care agencies that lacked basic records for services rendered.

State ranked last

Several influential state lawmakers, including Rep. Matt Dean, R-Dellwood, chairman of the House committee overseeing health care spending, said the findings show that Minnesota still needs to spend more at the front end to screen out unscrupulous providers. In 2013, Minnesota ranked last among states in anti-fraud outlays as a percentage of total Medicaid spending, according to the U.S. Department of Health and Human Services.

Spending on Medicaid fraud enforcement tends to draw support from even small-government conservatives because of the large return to taxpayers. In 2013, nationally, state agencies recovered $10.90 in fraudulent Medicaid billings for every dollar spent investigating fraud. The state of Minnesota collected slightly less, $10.23, for every dollar spent, according to federal data.

“We are a big-hearted generous state, but it infuriates people when they see others bill for services for which they are not entitled,” Dean said.

Home care is susceptible

Home care is a major focus of the anti-fraud effort because, in Minnesota and across the nation, home care services have been notoriously susceptible to Medicaid fraud.

Some owners of home care agencies admit they have no systematic way of knowing if caregivers actually show up for work at their clients’ homes. Personal care aides, who earn a median wage of less than $10 an hour, are sometimes tempted to collude with their clients to fabricate hours and pad their paychecks, say providers.

Though home care accounts for just 7 percent of Medical Assistance spending in Minnesota, it represents 43 percent of the Medicaid fraud investigations by Kerber’s office.

Last year, a Star Tribune investigation found that just one in four home caregivers and agencies notified by the state of wrongful billing practices in 2008 were ever convicted. It also revealed that the penalties imposed in these cases were usually a small fraction of the amount stolen.

Penalized for reporting fraud

Home care agencies have complained that they have little incentive to report fraud, because of a lack of follow-up by state investigators.

Pat Jones, co-founder of Superior Home Care in Duluth, said last May she sent the Department of Human Services a thick file with evidence that one of her former caregivers had stolen $54,000 from Medicaid by billing for services that were never provided. Several months passed, Jones said, before her agency received a bill from DHS to repay the $54,000 in fraudulent billings.

“What incentive do I have to report fraud?” Jones asked. “We did all the work to investigate, and then we got penalized for it.”

Responding to calls for tougher enforcement, the department is pushing legislation this spring that would require Medicaid home care operators to place at least one random, unscheduled phone call every three months to verify that their employees are actually providing the services in the home as scheduled. With state approval, providers could also use electronic monitoring tools to verify the presence of caregivers in the home.

In addition, the state’s unannounced, on-site screening visits are putting home care agencies on notice that they can be scrutinized, at any time, for fraud and overbilling. In recent visits, the state found cases where firms billed for services without time cards and employed supervisors who never even visited clients’ homes to check on caregivers.

“It’s new for providers to know someone is coming out and looking,” Kerber said. “Some of these [home care] organizations haven’t had much of a government inspection presence in their business.”


Twitter: @chrisserres