Medicaid Provider Fraud Report for Proviso 33.23

Submitted April 1, 2014

The South Carolina Department of Health and Human Services (SCDHHS) engages in an on-going effort to prevent and identify fraud in the Medicaid program, and to recover the funds lost because of fraudulent and excessive practices on the part of healthcare providers. Not only is this mandated by federal regulations found in 42 CFR 455, it is even more critical because of the need to better manage scarce public resources in a time of rising demand and decreasing tax dollars. The department is committed to increasing the numbers of cases referred to the SC Attorney General's Office for fraud and the recovery of funds lost due to fraud, waste and abuse.

The National Health Care Anti-Fraud Association estimates that fraud accounts for 3 percent of the nation's annual health care spending. Other estimates by government and law enforcement agencies such as the FBI place the loss due to health care fraud as high as 10 percent of annual health care expenditures. Federal regulations define fraud as "intentional deception or misrepresentation made by a person with the knowledge that the deception could result in an unauthorized benefit to himself or some other person." (42CFR 455.2) Medicaid fraud is a criminal matter. Waste, improper claims, billing errors, and abuse also cause losses of Medicaid funds but are not criminal actions.

SCDHHS receives fraud "tips" from its fraud hotline and also conducts extensive data mining to identify potential fraud cases. Federal regulations require SCDHHS to conduct a preliminary investigation upon suspicion of fraud and then refer the cases to the Medicaid Fraud Control Unit (MFCU) in the SC Attorney General's Office. Cases are also referred to the MFCU from other sources, such as the FBI, the US Department of Health and Human Services - Office of Inspector General, other state agencies, and the MFCU's own fraud hotline. SCDHHS' Division of Program Integrity conducts these preliminary investigations and collaborates with the MFCU on all fraud cases. Fraud cases can take several years before final adjudication and the collection of any penalties or claim refunds by SCDHHS.

In general, healthcare fraud involves filing a false claim for Medicaid payments, which can include services that were never provided, or were provided but were not medically necessary. The MFCU also participates in national cases against pharmaceutical companies that manipulate wholesale prices on drugs to get more money from Medicaid. While these are also considered fraud cases, they are prosecuted as civil cases as opposed to criminal cases.

The following table reports Medicaid provider fraud cases that were opened during calendar year 2013 updated for the most current data available through February 2014; the amounts recovered by the Attorney General's Office and Program Integrity and the number of convictions for the same time frame; and the number of recoveries from civil settlements in the national pharmaceutical cases. The federal share of the Medicaid funds recovered (approximately 69% - 70%) must be returned; SCDHHS can retain the state share of these recoveries and use it to again match federal monies for the on-going operation of the Medicaid program.

The total number of on-going cases for Medicaid provider fraud at the Attorney General's Office totaled 104 as of February 2014; 78 of these cases resulted from referrals by SCDHHS. This includes cases that were opened in previous years (and therefore not counted in the table below) but are still on-going.


  CY 2013
Provider Fraud Cases
New Provider Fraud Cases Opened 45
# / % Referred by SCDHHS 29 / 64%
Current Status:
Active 14
Closed 4
Recovered from Provider Fraud Cases (1) $1,239,860.19
Recoveries from all other Program Integrity cases (2) $9,377,884.99
Convictions 17
Pharmaceutical Manufacturer Cases
# of Cases with Recoveries 21
Amounts Recovered $14,793,812.80

(1) All dollars shown are Federal and State. Some of the recoveries in 2013 are from cases opened in prior year(s).

(2) Program Integrity recoveries due to cases for waste, overpayments, improper payments, and a that were not referred for potential fraud.

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