MEDICAID PROGRAM INTEGRITY MANUAL 
CHAPTER 1  Authority, Background, and 
Definitions 
 
Table of Contents 
      (Rev. 11948, Issued: 04-13-23) 
 
Transmittals for Chapter 1 
 
1.1  Basis of Authority  Statutory/Regulatory Citation  
1.2  Background  
1.3  Definitions  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  1.1 - Basis of Authority  Statutory/Regulatory Citation  
(Rev. 11948; Issued:04-13-23, Effective: 05-15-23; Implementation: 05-15-23) 
 
 
A.  Provisions for the Work of the Unified Program Integrity Contractors 
 
Section 1936 of the Social Security Act (the Act), established by the Deficit Reduction 
Act of 2005, is the statutory authority under which the Unified Program Integrity 
Contractors (UPICs) operate their Medicaid functions.  
 
Section 1936(a) of the Act provides that the Secretary must enter into contracts with 
eligible entities to conduct certain activities specified at section 1936(b) of the Act.  
 
Section 1936(b) of the Act provides that eligible entities under contract with the Centers 
for Medicare & Medicaid Services (CMS) will provide the following activities: 
 
(1) Review the actions of individuals or entities furnishing items or services 
(whether fee-for-service, risk, or other basis) under a State plan or any waiver to 
determine whether fraud, waste, or abuse has occurred; is likely to occur; or whether 
such actions have any potential for resulting in an expenditure of funds which is not 
intended. 
 
(2) Audit of claims for payment for items or services furnished, or administrative 
services rendered, under a State plan, including (A) cost reports; (B) consulting 
contracts; and (C) risk contracts under section 1903(m). 
 
(3) Identification of overpayments to individuals or entities receiving federal 
funds under this title. 
 
(4) Education or training, as the Secretary may establish, of certain individuals 
and entities with respect to payment integrity and quality of care.    
 
Additionally, Section 6402 of the Patient Protection and Affordable Care Act (Affordable 
Care Act) provides guidance related to the Medicaid integrity program; health care fraud 
oversight and guidance; suspension of Medicaid payments pending investigation of 
credible allegations of fraud; and the increased funding associated with targeting and 
preventing Medicaid fraud, waste, and abuse.  
 
Lastly, Section 6506 of the Affordable Care Act provides guidance related to Medicaid 
overpayment recoupment and federal repayment. 
 
B.  Provisions for State Collaboration with the Unified Program Integrity Contractors 
 
Section 1902(a)(69) of the Act entitled, State Requirement to Cooperate with Integrity 
Program Efforts requires that the Medicaid State plan provide that the State must  comply with any requirements determined by the Secretary to be necessary for carrying 
out the Medicaid Integrity Program established under section 1936.  
 
C.  Provisions for the Medicare-Medicaid Data Match Program (Medi-Medi Program) 
Section 1893(g) of the Act established the Medicare-Medicaid Data Match Program, 
which stipulated that: 
(1) Expansion of program. 
(A) In general.The Secretary shall enter into contracts with eligible entities or 
otherwise for the purpose of ensuring that, beginning with 2006, the Medicare-Medicaid 
Data Match Program (commonly referred to as the Medi-Medi Program) is conducted 
with respect to the program established under this title and State Medicaid programs 
under title XIX for the purpose of 
(i) identifying program vulnerabilities in the program established under 
this title and the Medicaid program established under title XIX through the use of 
computer algorithms to review claims data to look for payment anomalies 
(including billing or billing patterns identified with respect to provider, service, 
time, or patient that appear to be suspect or otherwise implausible); 
(ii) working with States, the Attorney General, and the Inspector General 
of the Department of Health and Human Services to coordinate appropriate 
actions to investigate and recover amounts with respect to suspect claims to 
protect the Federal and State share of expenditures under the Medicaid program 
under title XIX, as well as the program established under this title; 
(iii) increasing the effectiveness and efficiency of both such programs 
through cost avoidance, savings, and recoupments of fraudulent, wasteful, or 
abusive expenditures; and 
(iv) furthering the Secretarys design, development, installation, or 
enhancement of an automated data system architecture 
(I) to collect, integrate, and assess data for purposes of program 
integrity, program oversight, and administration, including the Medi-Medi 
Program; and 
(II) that improves the coordination of requests for data from 
States. 
(B) Reporting requirements.The Secretary shall make available in a timely 
manner any data and statistical information collected by the Medi-Medi Program to the 
Attorney General, the Director of the Federal Bureau of Investigation, the Inspector 
General of the Department of Health and Human Services, and the States (including a 
Medicaid fraud and abuse control unit described in section 1903(q)). Such information 
shall be disseminated no less frequently than quarterly. 
(2) Limited waiver authority.  The Secretary shall waive only such requirements of this 
section and of titles XI and XIX as are necessary to carry out paragraph (1).  (3) Incentives for states.  The Secretary shall study and, as appropriate, may specify 
incentives for States to work with the Secretary for the purposes described in paragraph 
(1)(A)(ii). The application of the previous sentence may include use of the waiver 
authority described in paragraph (2).  
 
1.2 - BACKGROUND  
(Rev. 11948; Issued:04-13-23, Effective: 05-15-23; Implementation: 05-15-23) 
 
The UPICs are contracted entities with CMS that conduct investigations/audits (which 
may be referred to as reviews by certain state Medicaid agencies) of providers billing 
in an effort to reduce fraud, waste, and abuse in both the Medicare and Medicaid 
programs. The UPICs operate in geographic areas or jurisdictions defined by individual 
Task Orders. 
 
The UPICs perform numerous functions to detect, prevent, and deter specific risks and 
broader vulnerabilities to the integrity of the Medicare and Medicaid programs including, 
but not limited to: 
 
  Proactively identify potential fraud, waste, and abuse that exist within its service 
area and take appropriate action on each case; 
 
  Investigate allegations of fraud made by beneficiaries, providers/suppliers, CMS, 
Health & Human Services Office of Inspector General (OIG), social media and 
other sources; 
 
  Jointly operate with other entities through agreements in the analysis of data, 
medical review and/or other specialty areas; 
 
  Explore all available sources of leads, including, but not limited to, state 
Medicaid agencies (SMAs), law enforcement, CMS Center for Program 
Integrity or its Regional Offices, social media, and the contractors own data 
mining; 
 
  Refer and/or recommend appropriate Medicaid administrative actions to the 
SMAs based on investigative/audit findings including, but not limited to: 
overpayments, payment suspensions, terminations, referrals to licensing boards, 
etc.; 
 
  Refer cases that aligns with the Medicaid Major Case Coordination process to 
the OIG/Office of Investigations (OI) for consideration of civil and criminal 
prosecution and/or application of administrative sanctions; 
    Partner with state Medicaid Program Integrity Units to perform the above 
activities for Medicaid investigations/audits; and 
 
  Work closely with CMS on joint projects, investigations/audits and other 
proactive, anti-fraud activities. 
 
The UPICs utilize a variety of techniques to address any potentially fraudulent, wasteful, 
or abusive billing practices based on the various leads they receive. The UPICs integrate 
the program integrity functions for investigations/audits across Medicare and Medicaid, 
and assure that CMSs national priorities for both Medicare and Medicaid are executed 
and supported at the state level or within the UPIC jurisdiction. 
 
1.3 - Definitions  
(Rev. 11948; Issued:04-13-23, Effective: 05-15-23; Implementation: 05-15-23) 
 
The following definitions provide additional context for the UPICs to reference while 
collaborating with SMAs. However, CMS recognizes that each SMA may use other terms 
and definitions than those noted below. The UPIC shall consult with each SMA to 
determine the appropriate terms and definitions to utilize during the collaboration.  In 
addition, the UPICs may refer to Exhibit 1 of the Medicare PIM for further definitions. 
 
Abuse - Abuse means provider practices that are inconsistent with sound fiscal, business, 
or medical practices, and result in an unnecessary cost to the Medicaid program, or in 
reimbursement for services that are not medically necessary or that fail to meet 
professionally recognized standards for health care. It also includes beneficiary practices 
that result in unnecessary cost to the Medicaid program. 
 
Case - A case is a work product that the UPIC opens as an investigation/audit after 
screening and vetting of a potential lead. 
 
Closing Summary  The Closing Summary is completed when an investigation/audit 
reveals that there are low/no findings (LNF) to pursue or the investigation/audit is being 
closed for other reasons, e.g. discontinued by the SMA and no overpayment was 
identified that would normally trigger an Initial Findings Report (IFR).  The UPICs shall 
use the Closing Summary template found at Appendix B to summarize the 
investigation/audit.  
 
Fraud  Fraud means an intentional deception or misrepresentation made by 
a person with the knowledge that the deception could result in some unauthorized benefit 
to himself or some other person. It includes any act that constitutes fraud under 
applicable Federal or State law. 
 
Investigation/Audit  An investigation/audit is the formal review of suspicious 
aberrancies in a providers submitted Medicaid claims to establish evidence that 
potential fraudulent activities or other improper payments have occurred.  The UPIC  shall focus its investigation/audit in an effort to establish the facts and the magnitude of 
the alleged fraud, waste, or abuse and take any appropriate action to protect Medicaid 
dollars.  
Generally, the activities associated with an investigation/audit may include, but are not 
limited to:  
 
  Interviews of recipients or providers,  
  Documentation requests to providers in the form of questionnaires, attestations, 
request for medical records, Managed Care Plan (MCP) contracts and contract 
deliverables, etc.  
  Post-payment reviews of claims,  
  Auditing for third party liability as well as usual and customary charges,  
  Identifying overpayment determinations,  
  Making referrals to the SMA for potential administrative actions, such as payment 
suspension or termination actions, and 
  Making referrals to law enforcement agencies for possible fraudulent activity.  
 
Investigative Plan of Action (IPA)  The Investigation Plan of Action (or Audit Test 
Plan) outlines the plan of action for conducting the investigation/audit of a provider.  The 
plan shall include the steps and timeframes necessary to meet investigative objectives.  
Please refer to the TO SOW at 4.4.1. 
 
The Investigative Plan should include, at a minimum, the following elements: 
 
  Provider Name 
  Provider NPI 
  Provider Medicaid Number, if different from NPI 
  Provider Address 
  Provider Type 
  Service codes and/or scheme being investigated 
  Dollars-at-risk for the scheme or service codes in question (not total dollars paid 
for the time period) 
  Time period being reviewed 
  Proposed action steps and estimated time to complete each step.  (NOTE:  Action 
steps need to include frequency of communication with the SMA.) 
 
Lead (Initiation of an Issue) - A lead is some indication that points toward a 
suspected instance of fraud, waste, or abuse.  A lead can come in the form of either 
proactive or reactive efforts, typically through complaints, data analysis, SMAs, 
newspaper articles, anonymous tips or some other channel.  
 
Medicaid - The Medicaid program was established under title XIX of the Social Security 
Act. The program is a joint federal-state funded health insurance program that is the  primary source of medical assistance for millions of low-income, disabled, and elderly 
Americans. The federal government establishes minimum requirements for the program, 
and states design, implement, administer, and oversee their own Medicaid programs. In 
general, states pay for the health benefits provided, and the federal government, in turn, 
matches qualified state expenditures based on the Federal Medical Assistance Percentage 
(FMAP), which can be no lower than 50 percent. 
 
All states participate in the Medicaid program, and as a requirement for receipt of federal 
matching, payments must cover individuals who meet certain minimum financial 
eligibility standards. Additionally, the states must cover certain medical services, such as 
physician, hospital, and nursing home care, and are provided the flexibility to offer a 
large number of optional benefits to beneficiaries. States also have the option to expand 
their Medicaid programs to cover additional beneficiaries who have income above the 
minimum financial threshold, up to statutory limits on income levels.  State governments 
have a great deal of programmatic flexibility within which to tailor their Medicaid 
programs to their unique political, budgetary, and economic environments. 
 
Medicaid Initial Findings Report  The Medicaid Initial Findings Report (IFR), is a 
summary of findings resulting from a UPIC investigation/audit of a Medicaid provider. 
The IFR will detail the timeframe and summary of the initial findings from the claims 
review, along with any other findings discovered during the investigation.  
 
Medicaid Final Findings Report  The Medicaid Final Findings Report (FFR) is a final 
summary of the findings resulting from a UPIC investigation/audit of a Medicaid 
provider when an overpayment has been identified and is being referred to the SMA for 
recovery.  In addition, the FFR may include areas where provider education is 
recommended.  The FFR is developed after CMS, the SMA, and the provider have fully 
reviewed the IFR, and the provider has had an opportunity to provide any rebuttal 
records to the initial findings, when applicable to the type of investigation/audit being 
conducted. Although the FFR is created by the UPIC, CMS is responsible for sending the 
FFR to the SMA.  The FFR provides details on the time period of the review, findings 
discovered during the investigation, summary of the claims review findings, total 
computable overpayment, and the total federal financial participation overpayment.  As 
part of the FFR, there is a transmittal letter attached to the report which contains details 
associated with the federal requirement for the state to remit the federal share of the 
overpayment to CMS within one year from the date of the letter.  
 
Medicaid Major Case Coordination  The Medicaid Major Case Coordination 
(Medicaid MCC) is a collaborative meeting held with SMA staff, law enforcement (LE), 
the respective UPIC, and CMS whenever the UPIC has identified a potential case 
warranting a fraud referral to LE.  It provides the opportunity for all entities to jointly 
discuss details of the investigation, determine whether LE will accept the referral, discuss 
any necessary administrative actions to be taken, and determine next steps following the 
MCC.   
  Medical Review - A medical review is a formal review of medical records by qualified 
UPIC personnel to determine if the documentation in the medical record supports what 
was billed by the provider and paid for by the Medicaid and/or Medicare programs.  The 
process is used as part of an investigation/audit to determine potential fraud, waste, or 
abuse. 
 
Overpayment  Overpayment means the amount paid by a Medicaid agency to a 
provider which is in excess of the amount that is allowable for services furnished under 
section 1902 of the Act and which is required to be refunded under section 1903 of 
the Act. 
 
Referral - A referral is the formal presentation of an issue to the SMA or law 
enforcement, or the receipt of a potential fraud lead from an SMA or another source.  
 
Reliable Information - Reliable information includes credible allegations, oral or 
written, and/or other material facts that would likely cause a non-interested third party to 
think that there is a reasonable basis for believing that a certain set of facts exists, for 
example, that claims are or were false or were submitted for non-covered or miscoded 
services.  
 
Reliable information of fraud exists if the following elements are found: 
 
 The allegation is made by a credible person or source. The source is 
knowledgeable and in a position to know. The source experienced or learned of the 
alleged act first hand, i.e., saw it, heard it, read it. The source is more credible if 
the source has nothing to gain by not being truthful. The source is competent; e.g., 
a beneficiary may not always be a credible source in stating that services received 
were not medically necessary. An employee of a provider who holds a key 
management position and who continues to work for the provider is often a highly 
credible source. The friend of a beneficiary who heard that the provider is 
defrauding Medicare may not be a particularly credible source. 
 
 The information is material. The information supports the allegation that fraud has 
been committed by making it more plausible, reasonable, and probable (e.g., 
instructions handwritten by the provider delineating how to falsify claim forms). 
 
 The act alleged is not likely the result of an accident or honest mistake. For 
example, the provider was already educated on the proper way to complete the 
form, or the provider should know that billing for a service not performed is 
inappropriate, or claims are submitted the same way over a period of time by 
different employees. 
 
Reliable evidence includes, but is not limited to, the following: 
 
 Documented allegations from credible sources that items or services were not 
furnished or received as billed.   Billing patterns so aberrant from the norm that they bring into question the 
correctness of the payments made or about to be made. 
 Data analysis that shows the provider's utilization to be well above that of its peers 
without any apparent legitimate rationale for this. 
 Statements by beneficiaries and/or their families attesting to the provider's 
fraudulent behavior. 
 Corroboration from provider employees (official and unofficial whistle blowers). 
 Other sources, such as prepayment and postpayment review of medical records.  
 Recommendations for suspension by OIG/OI, FBI, Assistant U.S. Attorneys 
(AUSAs), or CMS, based on their finding that the provider has already received 
overpayments and continued payments should be made only after a determination 
that continued payment is appropriate. 
 
Screening - Screening is the initial step in the review of a lead to determine whether 
further investigation/audit is warranted based on the potential for fraud, waste, or abuse. 
Screening shall be completed within 45 calendar days after receipt of the lead.  
 
Activities that the UPIC may perform in relation to the screening process include, but are 
not limited to:  
 
  Verification of providers enrollment status   
  Data analysis  
  Contact with the complainant, when the lead source is a complaint  
  Beneficiary interviews    
  Site verification to validate the providers/suppliers practice location  
  Review of state policy and regulations 
 
State Medicaid Agency (SMA)  This is the single state agency administering or 
supervising the administration of a state Medicaid plan. Each SMA establishes and 
administers their own Medicaid programs; they determine the type, amount, duration, and 
scope of benefits within broad federal guidelines.  
 
Vetting - Vetting is the process of determining whether a provider, who has been selected 
for an investigation/audit, is clear to pursue.  All leads and any new subjects that the 
UPIC determines warrants further investigation/audit are vetted through CMS and the 
SMA for approval before transitioning to an investigation/audit. Determinations are 
based on any ongoing law enforcement activity and/or current SMA activity with the 
provider.   
 
 
 
 
 
 
  Transmittals Issued for this Chapter 
Rev #  Issue Date  Subject  Impl Date  CR# 
Updates of Publication (Pub.) 100-15, 
R11948MPI 
Including Revisions to Chapters 1 
04/13/2023  and 2, and the Addition of Chapters  05/15/2023  13141 
3, 4, 5, and Appendices 
 
Updates to Chapter 1 of Publication 
R10384MPI 
10/09/2020  (Pub.) 100-15  11/10/2020  12000 
 
Update to Chapter 1 of Publication 
R10185MPI 
06/19/2020  (Pub.) 100-15  07/21/2020  11813 
 
Update to the Medicaid Program 
R3MPI  02/02/2018  04/03/2018  10340 
Integrity Manual (PIM) 
R1MPI 09/23/2011  Initial Publication of Manual  09/23/2011  NA 
 
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