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A bill that would limit the power of Utah's Medicaid Inspector General (OIG) to police health care providers has cleared its first legislative hurdle, after sparking contentious testimony over how to handle billing errors that drain taxpayer dollars.

HB315 largely clarifies the Legislature's intent in creating the OIG two years ago to crack down on the waste and abuse of Medicaid funds, after a string of legislative probes that found widespread "upcoding," or overcharging, by doctors and hospitals.

The bill directs the OIG to pursue its watchdog role without alienating the declining number of doctors willing to treat Medicaid patients — to differentiate "between honest mistakes and intentional errors, or fraud ... for the purpose of entering into settlement negotiations."

But the hospital-backed measure would also absolve providers for billing errors stemming from conflicting Utah Department of Health policies. It would limit the look-back period for investigations to three years and require investigators to collect evidence "on a day, and at a time, that is minimally disruptive" to the health professional.

And it would amend the current requirement that health care workers and state employees report billing errors to the OIG. Instead, whistle-blowers would first report errors to their employer or employing hospital "unless there is a credible allegation of fraud." If, within 30 days, the mistakes aren't fixed, the worker can report them to the OIG.

Current Inspector General Lee Wyckoff opposed the bill at a Monday committee hearing, saying it "muddies" current law and would hamper his ability to recoup misspent taxpayer funds. "I haven't heard a single example here today of people testifying that our office is overstepping its bounds," he said. "We are not a smash-and-grab operation."

Utah Hospital Association lobbyist Dave Gessel disagreed, insisting hospitals have "had many problems with the OIG." Last spring, he said, small rural health centers received letters from Wyckoff's office demanding repayment of close to $1 million in overcharges.

"As the hospitals, on their time and money, dug into it, they found that over half the claims had nothing to do with problems identified," and as a result, the OIG pulled back the audit, he said.

Wyckoff challenged Gessel's claims as unfair and inaccurate.

The demand letters were prepared and mailed by federal investigators "without my review," he said. "I didn't know the letters had gone out until I got calls from [the hospital association], reviewed them and within a matter of days retracted that audit with me calling each and every CEO or CFO of those organizations and apologizing personally. For [Gessel] to bring that in front of this organization and exploit it as something our office screwed up on, I think, is a good example of how things are misrepresented."

This drew an admonishment against "attacking [peoples'] character" from the committee co-chairman.

Dave Davis, president of the Utah Retailer Merchants Association, meanwhile, rallied for Wyckoff, commending him for working with pharmacies to clarify misinterpretations of federal billing rules.

"There was an attempt to claw back money [erroneously billed]," he said, "but in working with the OIG, that was set right."

Still, Davis said he supports setting firmer policing "guidelines and fence posts" because "we don't know who will come after Lee Wyckoff."

Frank Pignanelli, a lobbyist for a company that supplies the OIG with auditing software, warned if the state frees providers from liability over policy misunderstandings, taxpayers will be left holding the bag.

"You're basically exempting the providers, because there will be overpayments," he said, "and the federal government's going to want their money back."

But the physician-stacked House Health and Human Services Committee unanimously endorsed the bill as a prophylactic against the past investigatory sins of others.

"Sometimes there's a Gestapo approach. The fraud units get a 10 percent cut on the money they receive, so there's emphasis on them to go set up these stings based on limited information," said surgeon and Fruit Heights Republican Rep. Stewart Barlow. He referred to a raid, long before the creation of Utah's OIG, where federal agents closed a Richfield doctor's office, seizing computers and records. "They weren't guilty of fraud. It was just a coding error."

Rep. Mike Kennedy, R-Alpine, a physician, said medical coding, or billing, "is a byzantine process, at best. ... I can guarantee every health professional you know, including those on this committee, have committed some form of abuse of this process, in the vast majority of cases unknowingly." —

The battle over policing Medicaid

For a look at Utah's past efforts to attack Medicaid fraud, waste and abuse — and the state's new Inspector General: