A recent HHS OIG review of 2014 data on fraud allegations found that significant challenges were limiting the States’ use of payment suspensions, even in the face of what CMS determined were credible allegations of provider fraud. State Medicaid agencies are required to impose payment suspensions unless “good cause” exists for not suspending payments.
Fraud allegations can come from several sources, including law enforcement agencies, tips from fraud hotlines, and the agency’s own analysis of provider billing data. CMS describes an allegation of fraud as “credible” when it has indicia of reliability, the agency has conducted a preliminary investigation during which it reviewed the allegations thoroughly, and the agency acts judiciously on a case-by-case basis. Medicaid agencies have flexibility to make sure an allegation of fraud is consistent with State law.
If the State Medicaid agency is presented with a credible allegation of provider fraud, it must suspend payments or apply an exception by finding that “good cause” exists not to suspend payments. The most common example of “good cause” is when a law enforcement agency asks the State Medicaid agency not to impose a suspension to avoid alerting the provider it is under investigation. Regardless of whether it imposes a payment suspension, the agency must refer the case to the State’s Medicaid Fraud Control Unit (MFCU) for further investigation.
But OIG found that few States actually suspended payments. Medicaid agencies for 41 States reported imposing no more than 10 suspensions in all of 2014. In fact, of the 1,038 reported credible allegations of fraud in 2014, only 360 (28 percent) resulted in payment suspensions.
Medicaid agencies and MFCUs reported significant challenges that prevented them from imposing payment suspensions. First, demonstrating a sufficient level of evidence to support the suspensions when providers appealed was challenging. In addition, courts sometimes ruled in favor of providers by requiring a higher level of evidence than the “credible allegation” required by the regulation. Second, they reported that provider appeals interfere with the fraud investigations. Discovery permitted in the appeal can require the agency to turn over investigative reports and evidence which, the agencies argued, could potentially allow fraudulent providers an opportunity to alter or remove incriminating evidence before the MFCU can secure it. Third, the agencies and MFCUs reported challenges in sustaining payment suspensions through lengthy investigations without driving innocent providers out of business. Although the suspensions are labeled “temporary,” the reality is investigations can take years, which can force providers out of business due to the loss of revenue. This outcome is particularly harmful to providers where law enforcement ultimately decides not to prosecute.
In light of the challenges reported by the State agencies, OIG recommended that CMS provide additional technical assistance to help Medicaid agencies to fully utilize payment suspensions as a program integrity tool. Specifically, OIG recommended that CMS examine the data provided annually by the Sstate agencies to identify those agencies imposing few suspensions relative to the number of credible allegations of fraud, and provide technical assistance to those agencies. This could include working more closely with law enforcement agencies to determine the earliest time when a payment suspension would not significantly interfere with an ongoing investigation. This would allow the agency to stop the flow of money to fraudulent providers as soon as possible. CMS agreed with OIG’s recommendations.
