DEPARTMENT OF HEALTH & HUMAN SERVICES      
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, Maryland   21244-1850 
 
 
SMD # 16-005 
Re: Clarifying Free Choice of Provider 
Requirement in Conjunction with State 
Authority to Take Action against Medicaid 
Providers 
April 19, 2016 
 
Dear State Medicaid Director: 
 
The Center for Medicaid and CHIP Services (CMCS) and Center for Program Integrity (CPI) are 
issuing this State Medicaid Director Letter to provide guidance to state Medicaid agencies on 
protecting the right of Medicaid beneficiaries to receive covered services from any qualified 
provider willing to furnish such services when the state exercises its authority to take action 
against providers that affects beneficiary access to those providers, including but not limited to 
the denial or termination of provider enrollment, or the exclusion of providers from program 
participation.      
Background 
Under section 1902(a)(23) of the Social Security Act, Medicaid beneficiaries generally have the 
right to obtain medical services from any institution, agency, community pharmacy, or person, 
qualified to perform the service or services required . . . who undertakes to provide . . . such 
services.  This provision is often referred to as the any willing provider or free choice of 
provider provision.  Implementing regulations at 42 C.F.R.  431.51(b)(1) require a state plan 
to allow a beneficiary to  obtain Medicaid services from any institution, agency, pharmacy, 
person, or organization that is (i) qualified to furnish services and (ii) willing to furnish them to 
that particular beneficiary.  There is an exception for beneficiaries enrolled in certain managed 
care plans (to permit such plans to restrict beneficiaries to providers in the managed care plan 
network), except that such plans cannot restrict free choice of family planning providers.  See 
section 1902(a)(23)(B); 42 C.F.R.  431.51(b)(1); 42 C.F.R. Part 438.     
State Authority to Establish Provider Qualifications 
The free choice of provider provision does not infringe on states traditional role of setting 
reasonable standards relating to the qualifications of providers.  42 C.F.R.  431.51(c)(2).  
States must propose any standards relating to the qualifications of providers during the  Page 2  State Medicaid Director  
 
Medicaid state plan approval process, as specified in section 1902(a)(22) of the Act.  Because 
the free choice of provider provision guarantees Medicaid beneficiaries the right to see any 
willing and qualified provider of their choice, this provision limits a states authority to 
establish qualification standards, or take certain actions against a provider, unless those 
standards or actions are related to the fitness of the provider to perform covered medical 
servicesi.e., its capability to perform the required services in a professionally competent, 
safe, legal, and ethical manneror the ability of the provider to appropriately bill for those 
services.  Such reasons may not include a desire to target a provider or set of providers for 
reasons unrelated to their fitness to perform covered services or the adequacy of their billing 
practices.  The failure of a state to apply otherwise reasonable standards in an evenhanded 
manner may suggest such targeting.  For instance, if a state were to take certain actions against 
one provider or set of providers, but not other similarly situated providers, it would raise 
questions as to whether the state is impermissibly targeting disfavored providers.      
Moreover, when invoking standards that are validly related to a providers qualifications, the 
free choice of provider provision ensures that a state may not deny Medicaid beneficiaries 
the right to see the provider of their choice unless there is a sufficient basis.  A states action 
against a provider affecting beneficiary access to the provider must be supported by evidence 
of fraud or criminal action, material non-compliance with relevant requirements, or material 
issues concerning the fitness of the provider to perform covered services or appropriately bill 
for them.  Taking such action against a provider without such evidence would not be in 
compliance with the free choice of provider requirement.  If a state does not have evidence 
supporting its finding that a provider failed to meet a state standard, that provider remains 
qualified to furnish Medicaid services.  42 C.F.R.  431.51(b)(1)(i).    
The free choice of provider provision is specific with respect to the free choice of family 
planning providers.  Consistent with the reasonable standards guidance above, states may not 
deny qualification to family planning providers, or take other action against qualified family 
planning providers, that affects beneficiary access to those providerswhether individual 
providers, physician groups, outpatient clinics or hospitalssolely because they separately 
provide family planning services or the full range of legally permissible gynecological and 
obstetric care, including abortion services1 (not funded by federal Medicaid dollars, consistent 
with the federal prohibition), as part of their scope of practice.   
Conclusion 
                                                           
1 Federal Medicaid funding of abortion services is not permitted under federal law except in certain extraordinary 
circumstances (in cases of rape, incest, or when the life of the woman would be in danger). 
 
  Page 3  State Medicaid Director  
 
Pursuant to  431.51(b)(1)(i), states may establish provider standards or take action against 
Medicaid providers that affects beneficiary access to those providers only (1) based on reasons 
relating to the fitness of the provider to perform covered medical services or to appropriately 
bill for those services, and (2) with supporting evidence of the providers failure to meet the 
states reasonable provider standards.  This is consistent with longstanding CMS policy that 
Medicaid beneficiaries are provided with competent care by qualified providers and have the 
same ability to choose among available providers as those with private coverage.   
Providing the full range of womens health services neither disqualifies a provider from 
participating in the Medicaid program, nor is the provision of such services inconsistent with 
the best interests of the beneficiary, and shall not be grounds for a states action against a 
provider in the Medicaid program.   
CMS is available to work closely with each state to ensure compliance with Medicaids free 
choice of provider provision while at the same time preserving states authority to take 
appropriate actions against providers in their Medicaid programs.  If you have any questions 
regarding this information, please contact Kirsten Jensen, CMCS Director Division of Benefits 
and Coverage, 410-786-8146.          
Sincerely, 
              /s/ 
Vikki Wachino              
  Director 
cc: 
 
National Association of Medicaid Directors 
National Academy for State Health Policy 
National Governors Association 
American Public Human Services Association 
Association of State Territorial Health Officials 
Council of State Governments 
National Conference of State Legislatures