518.7 Withholding of payments.

(a) Basis for withholding.

(1) The department may withhold payments under the program, in whole or in part, when it has [reliable information that] determined that a provider [is involved in fraud or willful misrepresentation involving claims submitted to the program; or] has abused the program or has committed an unacceptable practice. [Reliable information] The department's determination that a provider has abused the program, or has committed an unacceptable practice may consist of preliminary findings by the department's audit or utilization review staff of unacceptable practices or significant overpayments, information from a State professional licensing or certifying agency of an ongoing investigation of a provider involving fraud, abuse, professional misconduct or unprofessional conduct, or information from a State investigating or prosecutorial agency or other law enforcement organization of an ongoing investigation of a provider for fraud or criminal conduct involving the program. The department may withhold payment of current and future claims to the provider and any affiliate.

(2) The department 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 department finds good cause not to withhold payments in accordance with 42 C.F.R. 455.23. A credible allegation of fraud is an allegation that has indicia of reliability and has been verified by the department, or the Medicaid fraud control unit, or another State agency, or law enforcement organization.

(i) Whenever the department initiates a withholding, in whole or in part, in relation to a pending investigation of a credible allegation of fraud, the department must make a fraud referral to the Medicaid fraud control unit. If the Medicaid fraud control unit does not accept the referral, then the department may refer the matter to another law enforcement organization.

(ii) The fraud referral made under this paragraph must be in writing and provided to the Medicaid fraud control unit or other law enforcement organization not later than the next business day after the withhold is enacted.

(b) Notice of the withholding will [usually] be given [prior to or contemporaneously with the withholding; however, in no event will notice of the withholding be given more than] within five days of [after the withholding of payments] taking such action unless requested in writing by a law enforcement organization to delay such notice. The notice will describe the reasons for the action, but need not include specific information concerning an ongoing investigation.

(c) The notice of withholding must:

(1)(i) state that the payments are being withheld in accordance with [42 C.F.R. 455.23 and] this section; and

(ii) in cases where there is a pending investigation of a credible allegation of fraud state that the payments are being withheld in accordance with 42 C.F.R. 455.23;

(2) state that the withholding is for a temporary period only and recite the circumstances under which the withholding will be terminated;

(3) specify whether the withholding applies to all or only some claims and identify which claims if not all claims are involved; and

(4) advise of the right to submit written arguments and documentation in opposition to the withholding and how to submit them in accordance with subdivision (e) of this section.

(d) The withholding may continue only temporarily.

(1) When initiated by the department prior to issuance of a draft audit report or notice of proposed agency action, the withholding will not continue for more than 90 days unless a written draft audit report or notice of proposed agency action is sent to the provider. Issuance of the draft report or notice of proposed action may extend the withholding until an amount reasonably calculated to satisfy the overpayment is withheld, pending a final determination on the matter.

(2) When initiated by the department after issuance of a draft audit report or notice of proposed agency action, the withholding will not continue for more than 90 days unless a written final audit report or notice of agency action is sent to the provider. Issuance of the report or notice of action may extend the withholding until an amount reasonably calculated to satisfy the overpayment is withheld, pending a final determination on the matter.

(3) When initiated by another State agency or law enforcement organization, the withholding may continue until the agency or prosecuting authority determines that there is insufficient evidence to support an action against the provider or its affiliate, or until the agency or criminal proceedings are completed.

(4) When initiated by the department when it has determined or has been notified that a provider is the subject of a pending investigation of a credible allegation of fraud all withholding actions will be temporary and will not continue after either of the following:

(i) The department, or the Medicaid fraud control unit, or other law enforcement organization determines that there is insufficient evidence of fraud by the provider.

(ii) Legal proceedings related to the provider's alleged fraud are completed.

(1) A provider or its affiliate that is the subject of the withholding is not entitled to an administrative hearing, but may, within 30 days of the date of the notice, submit written arguments and documentation that the withhold should be removed.

(2) Within 60 days of receiving written arguments or documentation in response to a withhold, the department 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.

(3) A decision by the department 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.

Section 518.9 of title 18 of NYCRR is amended to read as follows:

518.9 Incorporation by reference.

The provisions of the Code of Federal Regulations which have been incorporated by reference in this Part have been filed in the Office of the Secretary of State of the State of New York, the publication so filed being the booklet entitled: Code of Federal Regulations, title 42, Parts 455.23, revised as of October 1, [2008] 2011, published by the Office of the Federal Register, National Archives and Records Administration, as a special edition of the Federal Register. The regulations incorporated by reference may be examined at the Office of the Department of State, 99 Washington Ave, Albany, NY 12231 at the law libraries of the New York State Supreme Court and the New York State, and at the Office of the Medicaid Inspector General, Office of Counsel, 800 N. Pearl Street, Albany, New York 12204. They may also be purchased from the Superintendent of Documents, Government Printing Office Washington, DC 20402. Copies of the Code of Federal Regulations are also available at many public libraries and bar association libraries.

Statutory authority:

The Office of the Medicaid Inspector General (OMIG) is an independent office within the Department of Health (DOH) responsible for the prevention, detection and investigation of fraud and abuse in New York State's medical assistance (Medicaid) program pursuant to Public Health Law § 31.

Public Health Law § 32 sets forth the functions, duties and responsibilities of the OMIG, and specifically authorizes the OMIG to "implement and amend, as needed, rules and regulations relating to the prevention, detection, investigation and referral of fraud and abuse within the medical assistance program and the recovery of improperly expended medical assistance program funds." PHL § 32(20).

Legislative objectives:

The legislative objective is to protect the integrity of the Medicaid program. The purpose of this rulemaking is to update State regulations to be consistent with federal requirements. In March 2010 Congress passed the Patient Protection and Affordable Care Act (ACA) which contains a number of provisions intended to enhance Medicaid program integrity. Specifically, section 6402(h)(2) of ACA amended section 1903(i)(2) of the Social Security Act to provide that Federal Financial Participation (FFP) in the Medicaid program shall not be made to a State with respect to any amount expended for items or services (other than an emergency item or service, not including items or services furnished in an emergency room of a hospital) furnished by a provider to whom a State has failed to withhold payments under the plan during any period when there is pending an investigation of a credible allegation of fraud, unless the State determines that good cause exists not to withhold such payments. This rulemaking will bring New York's Medicaid program regulations into compliance with this provision of ACA.

Needs and benefits:

This rulemaking is required before the State's Medicaid program can implement the requirements of the ACA provision related to withholding of a provider's Medicaid payments where there is a pending investigation of a credible allegation of fraud against a provider.

This rulemaking makes several changes to 18 NYCRR § 518.7 entitled Withholding of payments.

Subdivision (a) of the regulation, relating to the basis for withholding, is amended to include the requirement that the Department must withhold Medicaid payments to a provider, 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 Department finds good cause not to withhold payments. It is also amended to define the term credible allegation of fraud pursuant to federal guidance contained in 42 C.F.R. § 455.2 and outline the law enforcement referral process the department must follow whenever the department initiates a withholding in relation to a pending investigation of a credible allegation of fraud.

Subdivision (b) of the regulation, related to timing of the notice of withholding, is amended to provide that a notice of withholding will be given within five (5) days of its implementation unless law enforcement requests in writing that such notice be delayed.

Subdivision (d) of the regulation is amended to reflect that the withhold will be temporary and will not continue until after either the department, the Medicaid fraud control unit, or other law enforcement organization determines that there is insufficient evidence of fraud by the provider or legal proceedings related to the provider's alleged fraud are completed.

Subdivision (e) of the regulation clarifies a provider's appeal rights and the process for an administrative review of the withholding.

In addition, this rulemaking amends 18 NYCRR § 518.9 to reflect changes made to 42 C.F.R. § 455.23, the federal regulation that implements the payment withholding requirements under ACA.

Costs:

a. costs to regulated parties for the implementation of and the continuing compliance with this rulemaking:

Regulated parties are not anticipated to incur additional costs as a result of this rulemaking.

b. costs to state government:

State government is not expected to incur any additional costs as a result of this rulemaking.

c. costs to the state agency:

OMIG is not expected to incur any additional costs as a result of this rulemaking.

Local government mandates:

The proposed rulemaking does not impose any new program, services, duties or responsibilities upon any county, city, town, village, school district, fire district, or other special district in general.

Paperwork:

No additional paperwork requirement will imposed upon regulated parties, however, under the federal requirements the State must maintain for a period of 5 years from the date of issuance all materials documenting the life cycle of a payment suspension that is imposed, including: (1) all notices of payments withheld in whole or in part; (2) all fraud referrals to MFCU or other law enforcement agencies; (3) all quarterly certifications by MFCU or other law enforcement agencies that a matter continues to be under investigation; (4) all notices documenting the termination of a withhold; (5) all documentation justifying the exercise of the good cause exceptions, in whole or in part. In addition, the State is required to annually report to the federal government information regarding the life cycle of each withholding imposed and any determinations to exercise the good cause exceptions not to withhold, to withhold only in part, or to discontinue a withholding.

Duplication:

This rulemaking does not duplicate any other federal or State regulation.

Alternatives:

The State must, by law, implement the federal requirements under section 6402(h)(2) of the Patient Protection and Affordable Care Act or risk the loss of FFP. There are no reasonable alternatives to this rulemaking.

Federal standards:

This amendment implements, but does not exceed any minimum standards of the federal government.

Compliance schedule:

Federal regulations are now in effect, and this rulemaking will be effective at the earliest date possible, consistent with the State Administrative Procedure Act requirements.

Effect of Rule:

This rulemaking will affect all providers participating in the medical assistance (Medicaid) program, including some small businesses and local governmental entities. The types of small business providers that may be subject to this rulemaking include, but are not limited to, pharmacies, physicians, dentists, durable medical equipment (DME) businesses, service bureaus, and transportation providers. A small percentage of local government providers, including some school districts that participate in the Medicaid program will be affected by this rulemaking.

Compliance Requirements:

There are no new reporting, recordkeeping, or other affirmative acts that a small business or local government will have to undertake to comply with this rulemaking.

Professional Services:

No professional services will be necessitated as a result of this rulemaking.

Compliance Costs:

This rulemaking does not impose any additional costs on any regulated business or industry or local government beyond those imposed by law. There is no annual cost anticipated for continuing compliance with the rulemaking. However, there may be an additional cost should a Medicaid provider fail to comply with existing federal and state laws, rules and regulations which would subject those providers to this proposed rulemaking.

Economic and Technological Feasibility:

This rulemaking would present no economic or technological difficulties to any small businesses or local governments that participate in the Medicaid program. This rulemaking does not impose a requirement for the purchase or use of new technologies.

Minimizing Adverse Impact:

This rulemaking will not have an adverse economic impact on the ability of small businesses or local governments to comply with Department requirements, as this rule does not change the substance of those requirements but instead may impose additional costs only upon Medicaid providers who are not in compliance with federal and state laws, rules and regulations.

Small Business and Local Government Participation:

In developing this rulemaking, the OMIG conducted extensive outreach specifically devoted to discussing this rulemaking by contacting trade groups, provider associations, other state agencies and other interested parties. Draft regulations, prior to filing with the Secretary of State, were shared with these groups and industry associations representing various providers, including members from small business and local government entities.

Small businesses and local government entities affected by this rulemaking will have the opportunity to submit written comments after publication of a general notice of proposed rulemaking.

Effect on Rural Areas:

This rulemaking implements the provisions of the Patient Protection and Affordable Care Act (ACA), under which it is mandatory for the State to withhold payments to medical assistance (Medicaid) program providers after the agency determines or is notified that a credible allegation of fraud exists involving the provider and for which there is a pending investigation. There are Medicaid providers located in rural, as well as suburban and metropolitan areas of the State.

Compliance Requirements:

No new reporting, recordkeeping or other compliance requirements are being imposed on providers as a result of this rulemaking.

Professional Services:

No additional professional services are required for providers to comply with this rulemaking.

Compliance Costs:

There are no costs associated with this rulemaking.

Minimizing Adverse Impact:

The proposed revisions to the regulation create consistency with existing federal rules and requirements. The rule applies uniformly to providers that do business in both rural and non-rural areas of New York State. The implementation of payment withholdings is mandated under federal requirements. ACA provides that Federal Financial Participation ("FFP") in the Medicaid program shall not be made to the State for items or services furnished by a provider (other than an emergency item or service, not including items or services furnished in an emergency room of a hospital) to whom a state has failed to withhold payments during any period when there is a pending investigation of a credible allegation of fraud against a provider, unless the State determines that good cause exists not to withhold such payments. This will have an adverse impact on providers that are the subject of a fraud investigation as their Medicaid payments will be withheld during the course of the investigation. The proposed revisions to the regulations create consistency with federal requirements.

Rural Area Participation:

In developing this rulemaking, the OMIG conducted extensive outreach specifically devoted to discussing this rulemaking by contacting trade groups, provider associations, other state agencies and other interested parties. Draft regulations, prior to filing with the Secretary of State, were shared with these groups and industry associations representing various providers, including members from rural areas.

In addition, public and private parties in rural areas affected by this rulemaking will have the same opportunity as public and private parties in suburban and metropolitan areas to submit written comments after publication of a general notice of proposed rulemaking.

The Office of the Medicaid Inspector General (OMIG) finds that this rule will have little or no impact on jobs and employment opportunities. Under this proposed rulemaking the State must withhold Medicaid payments to a provider 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 State finds good cause not to withhold payments. Failure to withhold payments by the State will result in the loss of Federal Financial Participation (FFP) for items or services (other than an emergency item or service, not including items or services furnished in an emergency room of a hospital) furnished by a provider to whom a State has failed to withhold payments under the plan during any period when there is pending an investigation of a credible allegation of fraud, unless the State determines that good cause exists not to withhold such payments. This proposed rulemaking may have an adverse effect on employees of providers against whom there is a credible allegation of fraud for which an investigation is pending, and the State imposes a full or partial withhold. Nevertheless, this proposed rulemaking is required in order to protect FFP, to comply with provisions of federal law, and to protect the integrity of New York's Medicaid program.