Department of Health and Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
C A
HALLENGES  PPEAR TO 
 
 
L S  U
IMIT  TATES   SE OF 
 
  M P
EDICAID  AYMENT 
 
  S  
USPENSIONS
 
 
 
 
 
 
 
 
 
Daniel R. Levinson 
Inspector General  
 
September 2017 
OEI-09-14-00020 
 
      Report  in  Brief  
 
September  2017 
OEI091400020 
 
 
Challenges Appear to Limit States Use of 
Why OIG Did This Review 
State  Medicaid agencies (Medicaid   Medicaid Payment Suspensions 
agencies) are  required to suspend  
payments for health care items and   What OIG Found  
services when there is a credible   Most Medicaid agencies (41 of 56) reported 
Key Takeaway
allegation of fraud against the  imposing 10 or fewer payment suspensions 
provider, unless good cause exists  during FY 2014. Medicaid agencies  reported  Significant challenges 
not to suspend payment.  Using  significant challenges associated with imposing  experienced by Medicaid 
payment suspensions, when  payment suspensions.  These include:     agencies appear to have  
prevented the  Federal 
appropriate, is important to protect 
   demonstrating sufficient evidence to  payment suspension  
Medicaid funds: payment suspensions 
support payment suspensions when  provisions from achieving  
based on credible allegations of fraud 
providers appealed,  their full potential to  
can swiftly  stop the flow of Medicaid  
 	  not jeopardizing law  enforcement 
 protect Medicaid funds.  
dollars to providers defrauding 
investigations when providers appealed, 

Medicaid.  A payment suspension can 
and 

remain in place throughout a law 
 	  sustaining payment suspensions through lengthy  fraud 

enforcement investigation and 
investigations, without unintentionally driving innocent 

potential  prosecution  of a health  care 
providers out of business. 

fraud case.    
Medicaid agencies often applied  good cause exceptions, during  
 
which  payments are not suspended, while law enforcement  
How OIG Did This Review 
investigated a credible allegation of fraud against a provider.   
We collected selfreported individual  
Additionally, Medicaid agencies reported taking actions that 
case data for credible allegations of 
improved their processes for payment suspensions, including how  
fraud, payment suspensions, and good  
they handle  fraud allegations and collaborate with  law 
cause exceptions during  Federal fiscal 
enforcement. 
year (FY) 2014 from Medicaid agencies.  
We also surveyed both Medicaid 
What OIG Recommends and Agency Response   
agencies and Medicaid Fraud Control 
We recommend that the Centers for Medicare &  Medicaid 
Units  regarding challenges and benefits 
Services provide additional  technical assistance to help Medicaid 
of payment suspensions that are based  
agencies fully utilize Medicaid payment suspensions as a program 
on a credible  allegation of fraud.   
integrity tool. CMS concurred with our  recommendation.  
 
  Full report can be  found at http://oig.hhs.gov/oei/reports/oei091400020.asp
  
 
       
TABLE OF CONTENTS 
 
Objective ......................................................................................................1 
Background ..................................................................................................1 
Methodology ................................................................................................6 
Findings........................................................................................................7 
Most Medicaid agencies imposed few payment suspensions  
based on credible allegations of fraud, reporting 10 or fewer  
suspensions in FY 2014 ...................................................................7 
Medicaid agencies experienced significant challenges with 
imposing payment suspensions ........................................................8 
Medicaid agencies often applied good cause exceptions .................9 
Medicaid agencies improved their processes for implementing 
payment suspensions, including how they handle credible 
allegations of fraud and collaborate with law enforcement ...........10 
Conclusion and Recommendation .............................................................12 
Agency Comments and Office of Inspector General Response .................13 
Appendix A: State Medicaid Agency FY 2014 Data .....................14 
Appendix B: Agency Comments ...................................................17 
Acknowledgments......................................................................................19 
 
 
 
 
 
 
 
 
 
 
   
OBJECTIVE 
To examine State Medicaid agencies (Medicaid agencies) and Medicaid 
Fraud Control Units (MFCUs) experiences with payment suspensions 
when there is a credible allegation of fraud against a health care provider. 
BACKGROUND  
A payment suspension is a program integrity tool for States to stop, as 
early as possible, Medicaid payments when there is a credible allegation of 
fraud against a provider.1  When a Medicaid agency determines that a 
credible allegation of fraud exists, the agency must suspend all or part of 
the Medicaid payments to the provider while law enforcement investigates 
and potentially prosecutes the provider, unless good cause exists not to 
suspend payment.   
Credible Allegation of Fraud 
The Centers for Medicare & Medicaid Services (CMS) generally describes 
allegations as credible when they have indicia of reliability and the State 
Medicaid agency has reviewed all allegations, facts, and evidence 
carefully and acts judiciously on a case-by-case basis.2  To accommodate 
variations among States, the regulations allow Medicaid agencies 
flexibility to determine what constitutes a credible allegation of fraud 
consistent with individual State law.3  Before determining that an 
allegation of fraud is credible, a Medicaid agency must conduct a 
preliminary investigation and may informally consult with MFCUs or 
other State agencies or law enforcement.4, 5  Allegations of fraud may 
come from a variety of sources, such as through a Medicaid agencys 
analysis of provider billing data, fraud hotline tips, and law enforcement 
agencies.6 
When a Medicaid agency determines that a credible allegation of fraud 
exists, Federal regulations require the agency to either impose a payment 
 
1 In this report, we use the term States to refer collectively to the 50 States, the District 
of Columbia, and the U.S. Territories of American Samoa, Guam, the Northern Mariana 
Islands, Puerto Rico, and the U.S. Virgin Islands.       
2 42 CFR  455.2. 
3 76 Fed. Reg. 5935 (February 2, 2011). 
4 42 CFR  455.14. 
5 CMS, Medicaid Payment Suspension Toolkit.  Accessed at 
http://www.cms.gov/Medicare-Medicaid-Coordination/Fraud-
Prevention/FraudAbuseforProfs/Downloads/medicaid-paymentsuspension-toolkit-
0914.pdf on May 11, 2017. 
6 42 CFR  455.2. 
1 
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020)   
suspension or apply an exception indicating that good cause exists not to 
suspend payments.7, 8  Additionally, by no later than the next business day, 
the Medicaid agency must refer the case for investigation to the States 
MFCU (or other appropriate law enforcement agency if the State does not 
have a MFCU).9, 10  The MFCU can then accept the referral and begin an 
investigation, or decline to investigate the provider.  If the MFCU 
declines, then the Medicaid agency must either discontinue the payment 
suspension or find another law enforcement agency to investigate.11  See 
Exhibit 1 on the next page for a general overview of the process. 
Medicaid Payment Suspension 
When Medicaid agencies impose a payment suspension, Federal 
regulations specify that they must notify providers of the payment 
suspension, the temporary nature of the payment suspension, and an 
appeals process.  
Notice of payment suspension to provider.  Generally, within 5 days of 
imposing the payment suspension, regulations require Medicaid agencies 
to send a notice of the payment suspension to the provider.  The notice can 
be delayed up to 90 days if the MFCU provides a written request to delay 
notification.  The notice must include (1) the legal basis for the payment 
suspension, (2) the general nature of the fraud allegation (but not specific 
information concerning an ongoing investigation), and (3) the applicable 
State administrative appeals process and corresponding citations to State 
law, among others.12   
Length of payment suspensions.  Federal implementing regulations 
describe payment suspensions as temporary.13  According to these 
regulations, the payment suspensions will not continue after authorities 
determine that there is insufficient evidence of provider fraud or legal 
proceedings related to alleged fraud are complete.14  Federal regulations do 
not further define the length of payment suspensions, other than that they 
are temporary.   
 
7 P.L. No. 111-148,  6402(h) codified at Social Security Act (SSA)  1903(i)(2)(C).  
Federal regulations were amended effective March 25, 2011.  42 CFR  455.23.   
8 A Medicaid agency can apply a good cause exception and then later impose a payment 
suspension (or vice versa) for the same credible allegation of fraud.   
9 42 CFR  455.23(d).   
10 MFCUs operate in 49 States and the District of Columbia, except North Dakota and all 
of the U.S. territories. 
11 42 CFR  455.23(d).  Some States may have also State-specific authority to impose a 
payment suspension outside of the Federal authority that is the subject of this report.   
12 42 CFR  455.23(b).   
13 SSA  1903(i)(2)(C); 42 CFR  455.23(c).  76 Fed. Reg. 5933 (February 2, 2011). 
14 42 CFR  455.23(c).   
2 
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020)   
Exhibit 1.  General Overview of States Processes For Credible Allegations of Fraud 
This exhibit illustrates a general overview of the payment suspension process; it does not 
represent all potential outcomes or State-specific processes.   
3 
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020)   
Provider appeals of payment suspensions.  If an individual States law 
provides for an administrative appeals process, the provider may request, 
and must be granted, a review of the payment suspension consistent with 
the States appeals process.15  In general, when a provider appeals a 
payment suspension, a State administrative court holds a hearing and may 
either uphold or overturn the payment suspension.16   
Good Cause Exception 
On a case-by-case basis, a Medicaid agency may determine that there is 
good cause not to suspend payments when there is a credible allegation of 
fraud against a provider, and instead apply a good cause exception.17  
For example, law enforcement officials may request that the Medicaid 
agency not impose a payment suspension to avoid alerting the provider, 
which could jeopardize a law enforcement investigation.18  When a 
Medicaid agency applies a good cause exception, providers continue to be 
paid (i.e., payments are not suspended) and providers are not notified that 
they are under investigation.   
Law Enforcement Investigations 
Law enforcement investigations of credible allegations of fraud continue 
whether a Medicaid agency imposes a payment suspension or applies a 
good cause exception.  On a quarterly basis, the Medicaid agency must 
request certification from the MFCU or other applicable law enforcement 
agency of the continuing investigation.19   
The MFCU or other applicable law enforcement agency may resolve the 
investigation in several ways.  The investigation continues until  
(1) appropriate legal action is initiated, (2) the case is closed or dropped 
because of insufficient evidence to support the allegation of fraud, or  
(3) the matter is resolved between the Medicaid agency and the provider.20  
Federal regulations do not impose a time limit on law enforcement 
investigations.   
 
 
15 42 CFR  455.23. 
16 For the purposes of this report, we use the term State administrative court to refer to 
the administrative law judges, administrative hearing officers, hearing commissions, and 
other State court authorities that may judge the legality of payment suspensions in a given 
State. 
17 SSA  1903(i)(2)(C); 42 CFR  455.23(e)-(f).   
18 42 CFR  455.23(e)-(f).   
19 42 CFR  455.23(d)(3)(ii); CMS, Medicaid Payment Suspension Toolkit.  Accessed at 
http://www.cms.gov/Medicare-Medicaid-Coordination/Fraud-
Prevention/FraudAbuseforProfs/Downloads/medicaid-paymentsuspension-toolkit-
0914.pdf on May 11, 2017. 
20 42 CFR  455.16(a)-(c). 
4 
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020)   
CMS Oversight of Medicaid Payment Suspensions 
CMS conducts oversight of Medicaid agencies use of payment 
suspensions in several ways.  CMS collects selected data related to 
payment suspensions, provides technical assistance, and issues guidance.  
Annually, CMS collects data such as the number of payment suspensions, 
good cause exceptions, and referrals to law enforcement from each 
Medicaid agency.21  CMS also provides technical assistance to Medicaid 
agencies upon request.  Further, in March 2011 and October 2014, CMS 
issued guidance to States about the Federal payment suspension 
regulations.  In 2011, CMS published an informational bulletin addressing 
questions about implementation of the Federal payment suspension 
regulations, such as potential sources of credible allegations of fraud.22  In 
2014, CMS published a toolkit that includes additional information on the 
payment suspension process, such as whether a State may rely on the 
MFCU to determine if an allegation of fraud is credible.  It also outlines 
factors and steps that Medicaid agencies may consider if a payment 
suspension creates access to care issues for beneficiaries.23  
Office of Inspector General Related Work 
The Office of Inspector General (OIG) initiated a series of reviews to 
determine whether Medicaid agencies imposed Medicaid payment 
suspensions when there is a credible allegation of fraud against a provider 
in accordance with the Federal regulations.  OIG found that the Medicaid 
agencies in Arkansas, Pennsylvania, Minnesota, and Louisiana complied 
with the Federal regulations and properly suspended payments when there 
was a credible allegation of fraud against a provider.24  However, OIG 
found that the Medicaid agencies in Washington, Ohio, New Jersey, and 
Florida did not fully comply with the Federal payment suspension 
regulations and OIG recommended these States address the identified 
areas of noncompliance.25   
 
21 42 CFR  455.23(g)(3), 76 Fed. Reg. 5939 (February 2, 2011). 
22 CMS, CPI-B 11-04, CPI-CMCS Informational Bulletin.  Accessed at 
http://oig.hhs.gov/fraud/medicaid-fraud-control-units-mfcu/files/payment-suspensions-
info-bulletin-3-25-2011.pdf on May 11, 2017.   
23 CMS, Medicaid Payment Suspension Toolkit.  Accessed at 
http://www.cms.gov/Medicare-Medicaid-Coordination/Fraud-
Prevention/FraudAbuseforProfs/Downloads/medicaid-paymentsuspension-toolkit-
0914.pdf on May 11, 2017. 
24 OIG, multiple State-specific reports during 20142016.  Accessed at www.oig.hhs.gov.  
Reference numbers:  A-06-15-00026 (Arkansas), A-03-14-00202 (Pennsylvania), A-05-
14-00009 (Minnesota), (A-06-16-00010) (Louisiana). 
25 OIG, multiple State-specific reports during 20142016.  Accessed at www.oig.hhs.gov.  
Reference numbers:  A-09-14-02018 (Washington), A-05-14-00008 (Ohio), A-02-13-
01046 (New Jersey), and A-04-14-07046 (Florida).   
5 
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020)   
METHODOLOGY 
We collected and examined case data for allegations of fraud that 
Medicaid agencies determined to be credible during Federal fiscal year 
(FY) 2014 (October 1, 2013September 30, 2014).  We surveyed both 
Medicaid agencies and MFCUs (collectively referred to as respondents).  
We collected and examined challenges and benefits that the respondents 
described as relating to the various steps in the payment suspension 
process, such as determining whether allegations of fraud were credible, 
imposing payment suspensions, and applying good cause exceptions. 
Data Collection and Analysis 
Credible allegation of fraud case data.  We requested that Medicaid 
agencies report certain data elements to OIG associated with credible 
allegations of fraud during FY 2014.  We sent our contacts an Excel 
spreadsheet to record the data elements for each credible allegation of 
fraud case, such as whether the Medicaid agency imposed a payment 
suspension, applied a good cause exception, and made a referral to law 
enforcement.  We compiled and calculated aggregate numbers for the data 
elements across all Medicaid agencies, including the number of credible 
allegations of fraud, payment suspensions, and good cause exceptions.  We 
received responses from all 56 Medicaid agencies.   
Survey data.  We surveyed all 56 Medicaid agencies and all 50 MFCUs to 
learn about their experiences related to the payment suspension process 
from March 2011 until the completion of OIGs data collection in October 
2015.   We sent the Medicaid agency survey to the individual that each 
Medicaid agency identified as its primary contact for this review.  We sent 
the MFCU survey to the MFCU directors.  We received responses from all 
106 respondents during AugustOctober 2015.  We synthesized the survey 
data and conducted qualitative analysis to identify the most significant 
challenges and benefits identified by respondents, based on their 
experiences in using the payment suspension process in their States. 
Limitations 
The survey data that Medicaid agency and MFCU respondents submitted 
and the case data Medicaid agencies submitted was self-reported.  We 
generally did not verify the accuracy or completeness of the self-reported 
data submitted by respondents.      
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency.   
6 
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020)   
FINDINGS 
Most Medicaid agencies imposed few payment 
suspensions based on credible allegations of fraud, 
reporting 10 or fewer suspensions in FY 2014 
Despite the potential of payment suspensions to help prevent taxpayer-
funded Medicaid dollars from being paid when there is a credible 
allegation of fraud against a provider, each of 41 Medicaid agencies 
reported imposing 10 or fewer payment suspensions in FY 2014.  
Furthermore, only 2 Medicaid agencies reported imposing over 50 
payment suspensions each.  Exhibit 2 displays the distribution of payment 
suspensions across States for FY 2014.  See Appendix A for State-level 
Medicaid data on payment suspensions, credible allegations of fraud, and 
good cause exceptions in FY 2014.   
Exhibit 2.  States Medicaid Payment Suspensions in FY 2014 
3States,
21-50 Payment 
10 States, Suspensions
11-20 Payment 
Suspensions 2 States,
51+ Payment 
Suspensions
41 States,
0-10 Payment 
Suspensions
 
Source: OIG analysis of payment suspension data from 56 Medicaid agencies, 2017.  
Thirty-one Medicaid agencies reported 10 or fewer credible allegations of 
fraud in FY 2014 (see Appendix A).  Because determining an allegation to 
be credible is a prerequisite for imposing a payment suspension, Medicaid 
agencies in these States consequently imposed few payment suspensions.  
Further, credible allegations of fraud identified by Medicaid agencies are 
an important source of fraud referrals for MFCUs, OIG, and other law 
enforcement agencies responsible for investigating and prosecuting 
providers who defraud Medicaid.
 
7 
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020)   
 
For allegations of fraud that Medicaid agencies determined to be credible, 
many agencies reported using more good cause exceptions than payment 
suspensions.  Of the combined 1,308 credible allegations of fraud in  
FY 2014 across all States, Medicaid agencies reported: 
  631 good cause exceptions (48 percent) and  
  360 payment suspensions (28 percent).  
For 124 (9 percent) credible allegations of fraud, Medicaid agencies 
reported using both payment suspensions and good cause exceptions.  For 
the remaining 193 (15 percent) credible allegations of fraud, Medicaid 
agencies reported that they did not use any good cause exceptions or 
payment suspensions.26    
Medicaid agencies experienced significant challenges 
with imposing payment suspensions 
Both Medicaid agency and MFCU respondents described a variety of 
challenges associated with imposing payment suspensions based on a 
credible allegation of fraud.   
Challenge: Demonstrating a sufficient level of evidence to 
support payment suspensions when providers appealed  
Respondents indicated that State administrative courts (courts) sometimes 
expected the Medicaid agency to present a higher level of evidence of 
provider fraud, rather than basing its determination on whether the 
allegation of fraud was simply credible, as defined in Federal 
regulations.  When Medicaid agencies used the credible allegation of fraud 
threshold and providers appealed the payment suspensions, courts 
sometimes ruled in favor of the providers by overturning the payment 
suspension, citing a lack of evidence to support the payment suspension.     
Challenge: Not jeopardizing ongoing law enforcement 
investigations when providers appealed 
Medicaid agencies explained that when a provider appeals, it is sometimes 
necessary to present a level of evidence that can risk compromising the 
fraud case.  Imposing a payment suspension alerts a provider to the 
investigation, but if a provider appeals, Medicaid agencies could face 
additional concerns.  Through the appeals discovery process, providers 
can receive copies of investigative reports and other evidence gathered by 
 
26 Medicaid agencies may not have imposed a payment suspension or applied a good 
cause exception because they continued to investigate an open credible allegation of 
fraud case, they determined that there was insufficient evidence of fraud (and therefore, 
did not further pursue the allegation), or the MFCU or other law enforcement entity did 
not accept the referral to investigate the allegation. 
8 
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020)   
MFCUs.  Access to details of the investigation can give fraudulent 
providers an opportunity to alter or remove incriminatory evidence before 
the MFCU can secure it.   
Challenge: Sustaining payment suspensions through lengthy 
fraud investigations without driving innocent providers out of 
business 
Medicaid agencies pointed to a contradiction between the description of 
payment suspensions as temporary and the reality that health care law 
enforcement investigations are often lengthy.  Federal regulations specify 
that payment suspensions are temporary enforcement actions that 
Medicaid agencies are to impose while MFCUs or other law enforcement 
entities investigate the fraud allegations.  However, respondents pointed 
out that law enforcement investigations often take many months, and 
sometimes years.  Investigations can involve multiple steps, such as 
interviewing witnesses, implementing search warrants, filing subpoenas, 
and coordinating with other law enforcement agencies.  In light of this, 
respondents reported that courts sometimes overturned payment 
suspensions, ruling that the suspensions were in place too long to 
reasonably be considered temporary.   
Respondents also described that lengthy payment suspensions can result in 
providers going out of business because of a loss of revenue.  This 
outcome would be appropriate or desirable in a case when the evidence 
demonstrates that the provider was actually defrauding the program.  
However, this outcome is particularly harmful to providers when their 
payments are suspended but law enforcement ultimately decides not to 
prosecute. 
Medicaid agencies often applied good cause 
exceptions  
Medicaid agencies more frequently applied good cause exceptions than 
imposed payment suspensions in FY 2014.  Given the challenges 
associated with payment suspensions based on credible allegations of 
fraud, respondents explained that good cause exceptions enable MFCUs to 
build a sufficient level of evidence to support payment suspensions, 
prevent jeopardizing law enforcement investigations, and do not limit 
patient access to services provided by health care providers.   
Medicaid agencies often applied a good cause exception at the request of 
law enforcement (61 percent of exceptions in FY 2014) to avoid alerting 
providers that investigations are underway.  Imposing a payment 
suspension and sending the required notice to providers, in contrast, would 
alert providers to the investigation.  Law enforcement request 
9 
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020)   
exceptions allow time for investigators to gather more evidence to support 
subsequent payment suspensions or to bring criminal charges against 
providers.  Once fraudulent providers are aware of investigations, 
respondents explained that those providers may alter or destroy records, 
expatriate or hide funds, or close their practices before law enforcement 
can execute search warrants and seize evidence.   
Medicaid agencies also explained that they applied good cause exceptions 
when a payment suspension would limit beneficiaries access to health 
care services.  Imposing a payment suspension can risk beneficiaries 
access to services because providers may stop offering services if their 
business is severely hurt by the revenue loss from the payment suspension.  
For example, Medicaid agencies might apply a good cause exception on a 
provider practicing in a rural area where the provider is the sole source of 
essential specialized services in that area.  Medicaid agencies can use two 
types of good cause exceptions in situations like these, either the not in 
the best interest of the State exception (20 percent of exceptions in  
FY 2014) or the access to care exception (1 percent of exceptions in  
FY 2014).27 
Medicaid agencies improved their processes for 
implementing payment suspensions, including how 
they handle credible allegations of fraud and 
collaborate with law enforcement  
Despite the challenges associated with payment suspensions, Medicaid 
agencies indicated that during our review period they took steps to 
improve their internal processes for addressing credible allegations of 
fraud.  Respondents explained that their agencies developed more formal 
structures for responding to credible allegations of fraud and suspending 
payments or applying good cause exceptions.  Specifically, some 
Medicaid agencies improved particular aspects of State processes, such as 
the timing of various steps in the process, how credible allegations are to 
be referred to the MFCU, and under what circumstances to delay payment 
suspensions or end good cause exceptions if the investigations did not 
reveal actual fraud.  Medicaid agencies indicated that they more clearly 
understand how and when to suspend payments, and the specific roles of 
the Medicaid agency and MFCU in the payment suspensions process. 
 
27 The other good cause exceptions used in FY 2014 include other remedies (9 percent); 
law enforcement declines to certify (5 percent); provider supplied evidence (2 percent); 
and multiple exceptions (3 percent).  Percentages of good cause exception types do not 
sum to 100 percent because of rounding. 
10 
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020)   
Medicaid agencies and MFCUs engaged in greater collaboration with each 
other.  Respondents described more frequent and substantial 
communication, such as informal and regularly scheduled meetings to 
discuss providers suspected of fraud.  Medicaid agencies and MFCUs 
worked together to determine whether allegations were credible, decide 
whether (and when) to suspend a payment, and prepare for provider appeal 
hearings.  For example, one Medicaid agency described its coordination 
with the MFCU to impose a payment suspension on the same day as the 
MFCU executed a search warrant at the providers facility.  This level of 
collaboration ensured that the provider was not alerted in advance of the 
search warrant.   
   
11 
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020)   
CONCLUSION AND RECOMMENDATION 
Federal payment suspension regulations afford State Medicaid agencies 
and their law enforcement partners flexibility in determining how to deal 
with credible allegations of fraud.  Required by Federal regulations to 
either impose a payment suspension or apply a good cause exception, 
Medicaid agencies more frequently opted for good cause exceptions.  
While this choice may allow States to avoid the challenges they 
experience with imposing payment suspensions, good cause exceptions 
permit payments to continue to providers under investigation for fraud.  
Ideally, Medicaid agencies would find ways to overcome the stated 
challenges that still allow them to fully utilize payment suspensions to 
stop swiftly the flow of Medicaid dollars to providers defrauding 
Medicaid.   
CMS has issued regulations and guidance for implementing payment 
suspensions, including the 2014 toolkit to help Medicaid agencies make 
judicious, case-by-case decisions about credible allegations of fraud.  To 
maximize protection of the Medicaid program, we recommend that CMS: 
Provide additional technical assistance to help Medicaid 
agencies fully utilize Medicaid payment suspensions as a 
program integrity tool 
Because of the various experiences and challenges that States encountered 
imposing Medicaid payment suspensions, CMS should provide additional 
technical assistance to Medicaid agencies.  To accomplish this, CMS 
should examine the annual data submitted by Medicaid agencies and 
identify those agencies that have a low number of payment suspensions 
based on credible allegations of fraud.  CMS should provide additional 
technical assistance to these Medicaid agencies to help them fully utilize 
payment suspensions as a program integrity tool.  For example, CMS may 
advise Medicaid agencies to work with their law enforcement partners to 
identify the earliest time at which a payment suspension would no longer 
jeopardize the fraud investigation, thereby preventing further waste of 
Medicaid funds.   
 
 
 
 
 
 
12 
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020)   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with OIGs recommendation.  CMS stated that it will 
continue to provide technical assistance to Medicaid agencies on the use 
of the payment suspension tool and will follow up when appropriate to 
determine if additional technical assistance is needed.  In providing 
additional technical assistance in response to the findings of this report, 
CMS should prioritize the delivery of technical assistance to those State 
agencies that have a low number of payment suspensions based on 
credible allegations of fraud. 
For the full text of CMSs comments, see Appendix B.   
13 
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020)   
APPENDIX A: STATE MEDICAID AGENCY FY 2014 DATA* 
Credible 
Payment  Good Cause 
Medicaid Agency**  Allegations of 
Suspensions  Exceptions 
Fraud 
Alabama  7  6  2 
Alaska  20  20  0 
Arizona  5  5  0 
Arkansas  40  9  37 
American Samoa  0  0  0 
California  45  22  21 
Colorado  4  1  4 
Connecticut  15  6  5 
Delaware  0  0  0 
D.C.  9  1  0 
Florida  5  4  5 
Georgia  17  1  17 
Guam  0  0  0 
Hawaii  7  1  5 
Idaho  7  2  4 
Illinois  16  5  8 
Indiana  2  2  0 
Iowa  145  20  101 
Kansas  4  3  2 
Kentucky  27  3  22 
Louisiana  128  5  122 
Maine  2  0  2 
Maryland  17  12  6 
Massachusetts  21  2  17 
Michigan  39  12  8 
Minnesota  60  17  0 
14 
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020)   
Credible 
Payment  Good Cause 
Medicaid Agency**  Allegations of 
Suspensions  Exceptions 
Fraud 
Mississippi  9  2  8 
Missouri  87  28  59 
Montana  3  1  1 
Nebraska  21  3  21 
Nevada  7  0  0 
New Hampshire  1  1  0 
New Jersey  13  11  2 
New Mexico  6  6  3 
New York  135  16  129 
North Carolina  57  11  42 
North Dakota  6  6  0 
N. Mariana Islands  0  0  0 
Ohio  32  30  32 
Oklahoma  2  0  2 
Oregon  6  6  0 
Pennsylvania  2  2  2 
Puerto Rico  19  8  0 
Rhode Island  7  4  2 
South Carolina  9  5  0 
South Dakota  0  0  0 
Tennessee  7  7  0 
Texas  70  70  30 
U.S. Virgin Islands  0  0  0 
Utah  12  12  0 
Vermont  25  5  19 
Virginia  5  5  0 
Washington  104  69  13 
15 
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020)   
Credible 
Payment  Good Cause 
Medicaid Agency*  Allegations of 
Suspensions  Exceptions 
Fraud 
West Virginia  2  2  0 
Wisconsin  12  12  0 
Wyoming  7  3  2 
TOTAL  1308  484***  755*** 
 
* The case data that Medicaid agencies submitted was self-reported.  Generally, OIG did not verify the accuracy 
or completeness of the self-reported case data submitted by Medicaid agencies. 
** American Samoa, Delaware, Guam, the Northern Mariana Islands, South Dakota, and the U.S. Virgin 
Islands did not have any Medicaid payment suspension data to submit. 
***The total number of payment suspensions and good cause exceptions include 124 cases with both payment 
suspensions and good cause exceptions.   
 
Source: OIG analysis of credible allegation of fraud data from 56 Medicaid agencies, 2017.   
16 
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020)   
APPENDIX B 
Agency Comments 
17 
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020)   
 
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020) 
    18   
ACKNOWLEDGMENTS 
Linda Min served as the team leader for this study.  Others in the Office of 
Evaluation and Inspections who conducted the study include  
Matt DeFraga and Anthony Soto McGrath.  Office of Evaluation and 
Inspections staff who provided support include Clarence Arnold, Kevin 
Manley, China Tantameng, and Marcia Wong. 
We would also like to acknowledge the contributions of other Office of 
Inspector General staff, including Rose Folsom, Jessica Swanstrom, 
Megan Tinker, Andrew VanLandingham, and Paul Westfall.  
This report was prepared under the direction of Blaine Collins, Regional 
Inspector General for the Office of Evaluation and Inspections in the  
San Francisco regional office, and Abby Amoroso and Michael Henry, 
Deputy Regional Inspectors General.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
To obtain additional information concerning this report or to obtain copies, 
contact the Office of Public Affairs at Public.Affairs@oig.hhs.gov.   
Challenges Appear to Limit States Use of Medicaid Payment Suspensions (OEI-09-14-00020) 
                                                                                                                                                    19   
Office of Inspector General
http://oig.hhs.gov  
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95452, as  
amended, is  to protect the integrity of the Department of  Health and Human Services  
(HHS) programs, as  well  as the health  and welfare of individuals served by those programs.  
This statutory mission is carried  out through a nationwide network of audits, investigations,  
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The Office  of  Audit Services  (OAS) provides auditing services  for HHS, either by  conducting  
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issues.  These evaluations focus on preventing fraud,  waste, or abuse  and promoting  
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