Using payment suspensions, when appropriate, is important to protect Medicaid funds: payment suspensions based on credible allegations of fraud can swiftly stop the flow of Medicaid dollars to providers defrauding Medicaid. A payment suspension can remain in place throughout a law enforcement investigation and potential prosecution of a healthcare fraud case.

Let’s take a look at the following exhibit from a recent Medicaid Payment Suspensions Report to determine how this process works.

Exhibit 1. General Overview of States’ Processes For Credible Allegations of Fraud. This exhibit illustrates a general overview of the payment suspension process; it does not represent all potential outcomes or State-specific processes. 

General Overview of States’ Processes For Credible Allegations of Fraud September 2017 OEI-09-14-00020  | CHALLENGES APPEAR TO LIMIT STATES’ USE OF MEDICAID PAYMENT SUSPENSIONS  

Since the passage of the ACA, States’ Medicaid agencies have been exercising their payment suspension authority. However, they reported confusion on how and sometimes when to report payment suspensions. These include the following:

  • Prevented the Federal demonstrating sufficient evidence to  payment suspension support payment suspensions when  provisions from achieving providers appealed,
  • Not jeopardizing law enforcement  investigations when providers appealed
  • Sustaining payment suspensions through lengthy fraud  investigations, without unintentionally driving innocent  providers out of business.

In New Mexico, 15 community health centers and behavioral health organizations had their Medicaid payments suspended which represented 85% of the state’s behavioral health spending. Even though this happened in 2014, the impact is still being felt as several of the facilities went out of business as a direct result.

In late 2014, the Centers for Medicare and Medicaid Services (CMS) Center for Program Integrity released a Medicaid Payment Suspension Toolkit to aid the states. This toolkit provided guidance and outlined the process that states should follow when they receive an allegation of fraud.  

Three Main Steps Required by State Medicaid Agencies

  1. State Medicaid agency receives allegation or complaint of fraud and is to conduct a preliminary investigation.
  2. State Medicaid agency determines if the allegation(s) of fraud is/are credible.
  3. State Medicaid agency must suspend payments or document a *good cause exception not to suspend payments or to suspend only in part.

*Good cause is defined as any of the following six situations:

  • 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 provider that is subject of the suspension, that the suspension should be removed.
  • Recipient access to items or services would be jeopardized by a payment suspension 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 Health Resources and Services Administration designated medically underserved area.
  • Law enforcement declines to certify that a matter continues to be under investigation.
  • The Medicaid agency determines that payment suspension is not in the best interests of the Medicaid program.

Further, suspension of payment may be imposed only in part where the following circumstances occur:

  1. Suspension in whole would so jeopardize beneficiary access to items or services as to present a danger to life or health.
  2. An investigation is solely and definitively centered on only a specific type of claim in which case a state may determine it is appropriate to impose a payment suspension on only that type of claim.
  3. An investigation of a credible allegation of fraud is limited to a particular business unit or component of a provider such that a suspension need not apply to the entire business unit or provider.
  4. When the state deems it in the best interests of the Medicaid program.

Medicaid Agencies’ Challenges with OIG Enforcement

Fast forward three years, and let’s see how the Medicaid agencies are doing. The Medicaid Payment Suspensions Report from the HHS OIG, released September 2017, found that 41 of 56 Medicaid agencies reported imposing 10 or fewer payment suspensions in 2014.  Ten states reported 11 to 20 payments suspensions, and only 2 states reported 51 or more payment suspensions.

Specifically, the report found that “Medicaid agencies often applied ‘good cause exceptions’ during which payments are not suspended, while law enforcement investigated a credible allegation of fraud against a provider. Additionally, Medicaid agencies reported taking actions that improved their processes for payment suspensions, including how they handle fraud allegations and collaborate with law  enforcement.”

However, significant challenges experienced by Medicaid agencies appear to have prevented the Federal payment suspensions provisions from achieving their full potential to protect Medicaid funds. There was confusion confusion about when to apply payment suspension and the audit recommended gaps to clear this up. CMS, on behalf of the MFCUs agreed. Given that the confusion in implementation is being addressed, we should see an increase in the number of suspensions going forward. 

OIG Stop Enrollment For Systemic Geographical Fraud

A second stick that the OIG was handed under the Affordable Care Act is the ability to stop enrollment to a new Medicaid provider if OIG deems there to be a systemic issue of fraud in a region or area.  Take this Medicaid example from Detroit and Miami  about how the Office of Inspector General has been actively utilizing its newly granted authority, under the Affordable Care Act, to issue a six month moratorium on new enrollments. The purpose of the moratorium is to allow OIG investigators to slow down new enrollments in a vertical or city where it is currently investigating and pursuing fraud and abuse. As described in the case above ambulance and hospice sectors have been the target for mass investigations for fraud and abuse.

As of September 2017, OIG continues to exercise its authority to extend a temporary moratoria in certain areas of concern.  

For more information on the moratoria, check out these resources:

Part B Enrollment Temporary Moratoria Extension

Provider Enrollment | Temporary Moratoria  

Summary: OIG has many tools at its disposal to curb and fine for fraud and abuse in healthcare.  They are stewards of, and have the responsibility to protect federal healthcare program dollars. Tools include preventing bad actors from getting access to Medicaid funds.  As the Medicaid Fraud Control Units step up their game in enforcement and add their ability to suspend payments while an investigation of a credible allegation of fraud exists, providers should be prepared to to weather the storm if they are under investigation. 


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Written by Michael Rosen, ESQ

ProviderTrust Co-Founder, mrosen@providertrust.com

Michael brings over 20 years of experience founding and leading risk mitigation businesses, receiving numerous accolades such as: Inc Magazine’s Inc 500 Award and Nashville Chamber of Commerce Small Business of the Year.

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