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Understanding Waste, Abuse & Fraud      

The Texas Health and Human Services Commission's Office of the Inspector General (OIG) was created by the Texas Legislature in 2003 to prevent, detect, and pursue waste, abuse and fraud.  Since that time, OIG has identified over $7 billion dollars in erroneous, wasteful or fraudulent payments for cost avoidance or recovery.  But how exactly does OIG define waste, fraud and abuse and what are some examples of things to avoid? 


Practices that a reasonably prudent person would deem careless or that would allow inefficient use of resources, items or services. Example: Public money spent on unnecessary program administration is considered wasteful.

These actions are indicators of waste:

  • Billing for unnecessary services
  • Allowing more DME supplies per month than needed by the client
  • Upcoding for evaluation and management services to obtain higher reimbursement


Practices that are inconsistent with sound fiscal, business, or medical practices and that result in unnecessary program cost. For example, abuse can include reimbursement for services that are not medically necessary, or that do not meet professionally recognized standards.

These actions are indicators of abuse:

  • Misuse of prescription medications
  • Misuse of medical services
  • Over-treatment of a client
  • Inappropriate referral patterns
  • Performing unnecessary services
  • Underutilization potentially leading to inappropriate or ineffective care
  • In managed care:
    • Delaying or denying care or services to enrollees
    • Creating difficult or unreasonable prior authorization requirements to avoid paying for certain procedures
    • Delaying first contact with clients, or delaying the assignment of a primary care physician
    • Failure to serve individuals with cultural or language barriers
    • Creating cumbersome appeals processes
    • Maintaining an ineffective grievance process
    • Delays in providing referrals to specialists
    • Providing incentives to illegally limit services


Any 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 could result in some unauthorized benefit to that person or some other person. Fraud may include any acts prohibited by the Texas Human Resources Code, Chapter 36, or Texas Penal Code, Chapter 35A. Under the Texas Medicaid Fraud Prevention Act, it includes knowing, willful and reckless acts.

These actions are potential indicators of provider fraud:

  • Inflating bills
  • Double-billing
  • Up-coding / unbundling
  • Billing for services never rendered
  • Inappropriate cost shifting
  • Billing for service previously provided
  • Falsifying medical records, provider enrollment documents, Title XIX forms
  • Stark Law and Anti-Kickback Statute violations
  • Medicaid card sharing schemes
  • Billing for services performed by others
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