Magellan Health

For Providers

Provider Compliance

Magellan Health Services compliance statement and resources

Fraud and Abuse Overview

Fraud and Abuse is a serious crime that legitimately concerns all parties to our behavioral healthcare system -- insurers and premium-payers, government and taxpayers, and consumers and behavioral healthcare providers - and is a costly reality government and society cannot afford to overlook.

For Instance, on February 2002, the HHS-OIG reported that of the $191.8 billion in claims paid in 2001, 6.3% - amounting to $12.1 billion - should not have been paid due to erroneous billing or payment, inadequate provider documentation of services to back up the claims and/or were outright fraud.

In response to these realities, Congress - through the Health Insurance Portability and Accountability Act of 1996 (HIPAA) - specifically established health care fraud as a federal criminal offense, with the basic crime carrying a federal prison term of up to 10 years in addition to significant financial penalties.

Congress also mandated the establishment of a nationwide "Coordinated Fraud and Abuse Control Program," to coordinate federal, state and local law enforcement efforts against health care fraud.

The Deficit Reduction Act (DRA) was passed by Congress in 2005. The DRA became effective January 1, 2007 and requires all entities in receipt of $5 million or more in annual Medicaid payments to establish and disseminate written policies that provide detailed information about the Federal False Claims Act, applicable state false claims laws including civil or criminal penalties for making false claims and statements, the "whistleblower" protections afforded under such laws and the role of such laws in preventing and detecting fraud, waste and abuse.

To ensure early detection and investigation, Magellan of Arizona has established multiple channels through which employees, consumers, providers, and other entities may report suspected fraud, waste or abuse. Magellan of Arizona will also disseminate written policies to all employees, contractors, agents, or other parties which or who, on behalf of Magellan of Arizona, furnish or otherwise authorize the furnishing of, Medicaid behavioral health care items or services; perform billing or coding functions; or are involved in the monitoring of health care provided by the entity.

What are Waste, Fraud and Abuse?

Billing errors are often referred to as waste. A billing error is an incorrect submission of a claim due to an honest mistake. Any number of things can cause a billing error. These include inexperienced office staff, coding illiteracy, staff turnover or a simple keying error. These are unintentional errors that could cause overpayment. In most cases, billing errors can be corrected through provider education/training.

An intentional deception or misrepresentation made by a person with the knowledge that the deception could result in some unauthorized benefit to the person or some other person. It includes any act that constitutes fraud under applicable Federal or State Law.

Provider practices that are inconsistent with sound fiscal business, or medical practices, and result in an unnecessary cost to the AHCCCS program, the State of Arizona or in reimbursement for services that are not medically necessary or that fail to meet professionally recognized standards for health care. It also includes behavioral health recipient practices that result in unnecessary costs to the AHCCCS program and/or the State of Arizona.

Fraud and Abuse Criteria

The following is list of criterion used by Magellan of Arizona to determine whether fraud or abuse is suspected and should be reported to AHCCCS -Office of Inspector General.  At least one of the following criteria must be met:

  • Evidence of knowing and intentional;
  • Duplicate billings;
  • Upcoding - billing for more expensive services or procedures than were actually provided or performed;
  • Miscoding;
  • Unbundling - practice of submitting bills piecemeal or in fragmented fashion to maximize reimbursement;
  • Misrepresentation of services - misrepresenting non-covered treatments as medically necessary covered treatments for purposes of obtaining payment;
  • Billing for services not rendered;
  • Evidence of false or altered documents;
  • Evidence of missing documentation;
  • Evidence of irregularities following sanctions for same problem;
  • Evidence of unlicensed or excluded professional or facility at time of services;
  • Evidence of management knowledge of fraudulent activity;
  • Reports of material irregularities by more than one reliable source.

And all of the following criteria must be met:

  • Pattern of occurrence of irregularities;
  • Actual loss to a governmental program;
  • Loss would be considered material for nature and type of activity and provider.

Or at least one of the following criteria is met:

  • Direct personal knowledge of fraudulent activity by known reliable individual;
  • Magellan of Arizona documented audit findings that show suspected fraud;
  • Report showing evidence of suspected fraud from another government or law enforcement agency.

What is my Role and Responsibility in Preventing and Detecting Provider Fraud and Abuse?

Behavioral health providers who furnish or otherwise authorize the furnishing of, Medicaid behavioral health care items or services; perform billing or coding functions must be cognizant of potential fraud and abuse within the public behavioral health system and are obligated to report actual, or suspected, occurrences to the appropriate authorities.

At a minimum, to prevent and detect fraud and abuse the Provider should have the following in place:

  • Internal controls, policies and procedures that are capable of preventing and detecting provider fraud and abuse activities.
  • Operational policies and controls such as claims edits, prior authorization, utilization and quality review, provider profiling, provider education, post-processing review of claims, and corrective action plans.
  • Procedures for providers on prevention, detection, and reporting of fraud and abuse.

What is my Role and Responsibility in Preventing and Detecting Consumer Fraud and Abuse?

At a minimum, to prevent and detect consumer fraud and abuse the Provider should have the following in place:

  • Policies and procedures focused on preventing and detecting consumer fraud and abuse activities.
  • A consumer handbook that includes:
    • Reference to reporting subcontracted providers that may be providing inappropriate or unnecessary services.
    • Language that describes fraud and abuse with reference to the penalty for fraud and abuse.
    • Misuse of an AHCCCS I.D.
    • Misrepresentation of assets or income.
    • Consumer surveys on services received by the client.

What are the Potential Disciplinary Action of Fraud and Abuse?

If alleged fraud or abuse is substantiated, disciplinary actions against a Provider agency may include the following:

  • Initiation of any contract remedies including corrective action, mandatory remedial training, etc.
  • Imposed monetary sanctions and penalties
  • Referral of case for possible criminal investigation and prosecution
  • Referral of the case to other regulatory authorities such as, AHCCCS and/or DBHS
  • Other civil remedies as allowed by state and federal law
  • Prohibition from participation in Medicare/Medicaid Programs
  • Contract Termination

How does a Provider Report an Incident of Suspected Fraud and Abuse?

Any subcontracted providers of care and non-contracted providers who suspect fraud or abuse are responsible for reporting all incidents. Reports may be made in written or verbal form. Magellan of Arizona has established a Fraud and Abuse Hotline for anonymous internal and external reporting. Initial reports of suspected waste, fraud and abuse are kept strictly confidential.

Magellan Fraud and Abuse Hotline (internal & external use): (800) 915-2108

Upon becoming aware of a suspected incident of fraud or abuse involving Title XIX and/or Title XXI funds, a Provider has 10 working days to inform the AHCCCS Office of Inspector General and the ADHS/DBHS Office of Program Integrity of suspected fraud and abuse in writing or by email at the addresses below. The AHCCCS Office of Inspector General will conduct and investigation. Providers should submit PM Form 7.1.1, Suspected Fraud or Abuse Report and fax or mail this form to ADHS/DBHS. Reports of fraud or abuse may also be taken over the phone at (602) 364-3758 or (866) 569-4927.

AHCCCS - Office of Inspector General
801 E. Jefferson Street, Mail Drop 4500, Phoenix, AZ 85034

A copy shall also be sent to the ADHS/DBHS Compliance Audit Manager at:

ADHS/DBHS Office of Program Integrity
150 N. 18th Ave., Suite 280 Phoenix, AZ 85007

If a provider or recipient is suspected of fraud or abuse and it does not involve any Title XIX or Title XXI funds, the case will be referred to ADHS/DBHS Office of Program Integrity, for further investigation.

ADHS/DBHS Office of Program Integrity
150 N. 18th Ave., Suite 280 Phoenix, AZ 85007

If a Magellan of Arizona discovers, or is made aware that an incident of suspected fraud and abuse has occurred, the Magellan of Arizona Fraud and Abuse Manager or the Chief Compliance Officer shall report the incident to the AHCCCS Office of Inspector General for investigation and notify the ADHS/DBHS Office of Program Integrity. The suspected fraud and abuse incident will also be reported to Magellan's Special Investigation Unit.

Adam Fields
Fraud and Abuse Manager
Magellan Health Services of Arizona
Phone: (602) 572-5917
Fax: 1-800-424-4798

Phyllis L. Knox
Chief Compliance Officer
Magellan Health Services of Arizona
Phone: (602) 572-5914
Fax: 1-800-424-4798

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Contact Information

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