Credible Allegations of Fraud

Posted by Rebecca Brommel on Friday, February 20, 2015

The phrase “credible allegation of fraud” sounds like just another legal phrase with which only criminal lawyers need to be concerned.  However, in the world of healthcare, “credible allegation of fraud” has significant meaning, and if you are in the healthcare sector, it is something that should be on your radar.

A credible allegation of fraud allows states to withhold Medicaid payments to a provider without prior notice to the provider.  This can certainly put providers – especially those with a significant Medicaid patient or resident base – in a pinch related to their ongoing business operations.  When the state receives a credible allegation of fraud, it is required to conduct a preliminary investigation.  However, the regulations (42 C.F.R. chapter 455) do not provide any guidance as to the extent or minimum requirements for this preliminary investigation.  Thus, these preliminary investigations can be very minimal and simply consist of some very basic confirmation of the information received as the credible allegation.  Notably, the information necessary to establish a credible allegation of fraud is much lower than the prior “reliable evidence” requirement under the rules as they existed prior to the Affordable Care Act.  Our next blog post will more specifically address the types of credible allegations of fraud that have served as the basis for provider suspension.

Although the state is not required to give a provider prior notice of the Medicaid withholding, the state must give written notice to the provider within five (5) days after the suspension’s effective date.  The written notice may be delayed up to thirty (30) days after the suspension if law enforcement requests a delay for issuance of the notice.  The written notice is required to include: (1) a statement that the payments are being suspended in accordance with 45 CFR section 455.23; (2) a statement of the general allegations as to the suspension action, but it is not required to disclose specific information concerning an ongoing investigation; (3) a statement that the suspension is for a temporary period and describe the circumstances under which the suspension will be terminated; (4) specify, if applicable, the types of Medicaid claims or business units to which the suspension is being applied; (5) inform the provider of the right to submit written evidence for consideration by the state Medicaid agency; and (6) set forth the applicable state administrative appeals process.

Once a suspension notice is received, a provider has a couple of options.  First, the provider can initiate the state administrative appeals process. While this may be necessary to preserve the provider’s right to a hearing, it often cannot happen soon enough to address the provider’s immediate financial situation.  Second, the provider can submit information to the state Medicaid agency.  The submission of information could be geared toward showing the state that a “good cause” exception exists such that a suspension should not be imposed.  There are a number of good cause exceptions, which range from showing that the provider is the sole source of an essential, specialized service in the community to showing that the provider is putting additional processes in place to protect Medicaid funds.  Often, this submission of information leads to the development of a settlement agreement regarding the suspension.  The terms of these settlement agreements will be addressed in a future blog post.

In addition to dealing with the credible allegation of fraud procedure, a provider may also be simultaneously faced with a criminal investigation and charges, a Medicaid Fraud Control Unit (“MFCU”) investigation, default of its financial covenants to any lenders and public relations issues.  Because of this, it is important to consider the wide-ranging impact of any information or statements provided to the state Medicaid agency while at the same time attempting to keep the daily business needs met and the patients or residents serviced.  It is a balancing act that often takes a group of professionals to handle and most importantly, a provider willing to cooperate and supply completely accurate information.