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Challenges Appear to Limit States' Use of Medicaid Payment Suspensions


State Medicaid agencies (Medicaid agencies) are required to suspend payments for health care items and services when there is a credible allegation of fraud against the provider, unless "good cause" exists not to suspend payment. 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 the law enforcement investigation and potential prosecution of the health care fraud case.


We collected self-reported individual case data for credible allegations of fraud, payment suspensions, and good cause exceptions during Federal fiscal year (FY) 2014 from Medicaid agencies. We also surveyed both Medicaid agencies and Medicaid Fraud Control Units regarding challenges and benefits of payment suspensions that are based on a credible allegation of fraud.


Most Medicaid agencies (41 of 56) reported imposing 10 or fewer payment suspensions during FY 2014. Medicaid agencies reported significant challenges associated with imposing payment suspensions. These include (1) demonstrating sufficient evidence to support payment suspensions when providers appealed, (2) not jeopardizing law enforcement investigations when providers appealed, and (3) sustaining payment suspensions through lengthy fraud investigations without unintentionally driving innocent providers out of business. Medicaid agencies often applied "good cause exceptions," during which payment suspensions 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.


We recommend that the Centers for Medicaid & Medicare Services (CMS) provide additional technical assistance to help Medicaid agencies fully utilize Medicaid payment suspensions as a program integrity tool. CMS concurred with our recommendation.