OMIG Adopts Regulations Concerning Withholding of Medicaid Payments When Fraud Is Alleged

In accordance with federal law, the OMIG has finalized proposed regulatory changes to conform New York State law to federal law regarding the withholding of payments to Medicaid providers when there is a “credible allegation of fraud. This requirement is imposed on States that participate in the Medicaid program as part of the the Affordable Care Act. The regulations that have been modified are 18 NYCRR 518.7 and 18 NYCRR 518.9.  18 NYCRR Part 518.9 has incorporated the above federal regulation by reference in its entirety.

There was public comment on the proposed regulatory changes. However, the OMIG did not make any changes as a result of the public comment. A minor technical correction was made in 18 NYCRR § 518.7(a)(1) in that the term “law enforcement agency was deleted and replaced with the term “law enforcement organization.

The federal mandate

Under the OMIG’s rule changes, mandated by federal law, the Medicaid program must withhold payments under the program, in whole or in part, when it has determined or has been notified that a provider is the subject of a pending investigation of a “credible allegation of fraud unless the OMIG finds good cause not to withhold payments in accordance with the applicable federal regulation (see 42 CFR § 455.23). A “credible allegation of fraud is defined as an allegation that has indicia of reliability and has been verified by the Medicaid program, the Medicaid Fraud Control Unit (MFCU), another State agency, or another law enforcement organization.

“Good cause not to suspend payments in their entirety.

“Good cause includes the following factors:

• Law enforcement officials have specifically requested that a payment suspension not be imposed because such a payment suspension may compromise or jeopardize an investigation.
• Other available remedies implemented by the State more effectively or quickly protect Medicaid funds.
• The State determines, based upon the submission of written evidence by the individual or entity that is the subject of the payment suspension, that the suspension should be removed.
• Recipient access to items or services would be jeopardized by a payment suspension because of either of the following:
  • An individual or entity is the sole community physician or the sole source of essential specialized services in a community.
  • The individual or entity serves a large number of recipients within a HRSA-designated medically underserved area.
  • Law enforcement declines to certify that a matter continues to be under investigation.
  • The State determines that payment suspension is not in the best interests of the Medicaid program.

(See 42 CFR § 455.23)

“Good cause to suspend payment only in part.

Under the federal law, a State may find that good cause exists to suspend payments in part, or to convert a payment suspension previously imposed in whole to one only in part, to an individual or entity against which there is an investigation of a credible allegation of fraud if any of the following are applicable:

• Recipient access to items or services would be jeopardized by a payment suspension in whole or in part because an individual or entity is the sole community physician or the sole source of essential specialized services in a community or the individual or entity serves a large number of recipients within a HRSA-designated medically underserved area.
• The State determines, based upon the submission of written evidence by the individual or entity that is the subject of a whole payment suspension, that such suspension should be imposed only in part.
• The credible allegation of fraud focuses solely and definitively on only a specific type of claim or arises from only a specific business unit of a provider, and the State determines and documents in writing that a payment suspension in part would effectively ensure that potentially fraudulent claims were not continuing to be paid.
• Law enforcement declines to certify that a matter continues to be under investigation.
• The State determines that payment suspension only in part is in the best interests of the Medicaid program.

(See 42 CFR § 455.23).  Only time will tell how the OMIG will apply these various factors in determining whether to suspend Medicaid payments in whole or in part.  The law does grant some flexibility to states in applying these factors.

Procedure

Whenever the OMIG initiates a withholding, in whole or in part, in relation to a pending investigation of a credible allegation of fraud, it must make a fraud referral to the Medicaid Fraud Control Unit (MFCU). If the MFCU does not accept the referral, then the OMIG may refer the matter to another law enforcement organization. The fraud referral must be in writing and provided to the MFCU or other law enforcement organization not later than the next business day after the withhold is enacted.

Notice of the fraud withholding shall be given within five days of taking such action unless requested in writing by a law enforcement organization to delay such notice. Obviously, the giving of such notice would inform the provider that it is under investigation for alleged fraudulent conduct. The notice must  describe the reasons for the action but need not include specific information concerning an ongoing investigation.  The notice must state that the payments are being withheld in accordance with 42 C.F.R. 455.23.

Fraud withholding actions will be temporary and will not continue after either the MFCU or other law enforcement organization determines that there is insufficient evidence of fraud by the provider or if legal proceedings related to the provider’s alleged fraud are completed.

A provider, or its affiliate, that is the subject of the fraud withholding is not entitled to an administrative hearing to challenge the withholding. However, within 30 days of the date of the notice, the provider may submit written arguments and documentation to support the removal of the withhold.  Within 60 days of receiving written arguments or documentation in response to a withhold, the OMIG will review the determination and notify the provider or its affiliate of the results of that review. After the review, the determination to impose a withhold may be affirmed, reversed or modified, in whole or in part.

A decision by the OMIG to affirm, reverse, or modify a withhold on appeal shall not be a determination of the merits of any investigation initiated by another State agency, the Medicaid fraud control unit, or other law enforcement organization.

For more information please contact the author of this post, David R. Ross.