Medicaid agencies struggle to stop payments to healthcare providers accused of fraud

During fiscal year 2014, 41 out of 56 Medicaid agencies said they imposed 10 or fewer payment suspensions on providers that were facing credible allegations of fraud.

Medicaid agencies are having a difficult time imposing payment suspensions on providers against which there is credible allegation of fraud, according to a new government watchdog report.

The report (PDF), from the Department of Health and Human Services’ Office of Inspector General, examined self-reported case data from both Medicaid agencies and Medicaid Fraud Control Units (MFCUs) for fiscal year 2014. During that time, 41 out of the 56 agencies said they imposed 10 or fewer payment suspensions. In addition, just two agencies reported imposing more than 50 payment suspensions each.

One reason for the low number of payment suspensions is that many agencies reported few credible allegations of fraud, the report noted. And for allegations deemed to be credible, many agencies used what’s called a “good cause” exception, during which payments are not suspended while law enforcement investigates a provider.

There are advantages to taking the good-cause exception approach, however. Agencies told the OIG that it allows MFCUs to build a sufficient level of evidence to support payment suspensions, avoids alerting providers to an investigation, and ensures that patients continue to access healthcare services.

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Medicaid agencies also noted that while payment suspensions are required to be temporary, fraud investigations can often drag on for months or years. That can put a payment suspensions at risk for being overturned by a court, or could drive providers out of business that turn out to be innocent.

Despite these challenges, though, the report noted that Medicaid agencies are developing more formal structures for responding to credible allegations of fraud and subsequently, suspending payments or applying good cause exceptions. In addition, Medicaid agencies and MFCUs are collaborating more often.

To keep this momentum going, the OIG recommended that the Centers for Medicare & Medicaid Services use its data to identify Medicaid agencies with a low number of payment suspensions, and then offer them additional technical assistance to help them fully utilize this program integrity tool.