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New York Office of Medicaid Inspector General Proposes Regulations on Medicaid Managed Care Fraud, Waste, and Abuse Prevention

On July 26, 2022, we published a blog post detailing part one of three of proposed regulations published by the New York State Office of Medicaid Inspector General (OMIG). The proposed regulations would repeal the current Part 521 - Provider Compliance Programs of Title 18 of the New York Codes, Rules and Regulations (NYCRR) in its entirety and establish new requirements for providers to detect and prevent fraud, waste, and abuse in the Medicaid Program under a new Part 521: Fraud, Waste, and Abuse Prevention (Part 521). If enacted, the proposed rules would implement changes related to Medicaid provider compliance programs, Medicaid managed care organization (MMCO) fraud, waste, and abuse prevention, and Medicaid providers’ “obligation to report, return, and explain Medicaid overpayments through OMIG’s Self-Disclosure Program.”

In this post, we summarize the second subpart of Part 521 covering proposed regulations that would require MMCOs to develop and implement programs to detect and prevent fraud, waste, and abuse in the Medicaid program.

Definitions – Section 521-2.1 & Section 521.2:

The regulation defines “abuse” to include practices that are inconsistent with sound fiscal, business, medical or professional practices.  These practices could result in the following:

  • Unnecessary costs to the Medicaid program; and
  • Payments for services that fall below recognized health care standards or were not medically necessary.

The definition of “fraud” includes the following:

  • Intentional deceptions or misrepresentations made with knowledge that it could result in an unauthorized benefit; and
  • Acts that constitute fraud under applicable federal or New York laws, including New York’s Medicaid false claims act.

Duties of Medicaid Managed Care Organizations – Section 521-2.3

The below requirements will serve as a minimum standard of a MMCO’s fraud, waste, and abuse prevention program, and as such, a MMCO’s prevention program may go above and beyond the below requirements:

  • Fraud, Waste, & Abuse Prevention Policies: MMCOs must adopt and implement policies for the detection and prevention of fraud, waste, and abuse.
  • Record Retention: In addition to the record retention requirements imposed under a MMCO’s contract with the Department of Social Services, MMCOs and their subcontractors must retain all records demonstrating they have adopted, implemented, and operated a fraud, waste, and abuse prevention program satisfying the requirements of this Subpart.
  • Contracts with Third Parties: MMCOs must ensure that their contracts with contractors, agents, subcontractors, independent contractors, and participating providers specify that such parties are subject to audit, investigation, or review under the MMCO’s fraud, waste, and abuse prevention program.

Compliance Program - Section 521-2.4(a):

As detailed in our previous post, MMCOs (among other entities) must implement and maintain a compliance program in accordance with Subpart 521-1. Under this Subpart 521-2, MMCOs must ensure that its fraud, waste, and abuse prevention programs are incorporated into its compliance program and otherwise satisfies the requirements of Section 521-1.4(a) related to written policies and procedures, compliance officer duties, and training requirements.

Special Investigation Unit - Section 521-2.4(b):

MMCOs with an enrolled population in excess of 1,000 persons or more in any given year, must establish a full-time Special Investigation Unit (SIU). SIUs must identify and investigate cases of potential fraud, waste, and abuse, and in turn, report such cases to OMIG and report potential fraud to the Medicaid Fraud Control Unit (MFCU). An MMCO’s SIU must operate as a separate and distinct unit from any other function or unit of the MMCO.

  • Staffing Requirements: MMCOs must employ at least one full-time lead investigator and one SIU director. The lead investigator and SIU director must be based in New York and will be responsible for communicating and coordinating with OMIG and MFCU. In addition, MMCOs must employ or utilize existing employees to support the work of the SIU.  MMCOs must employ one full-time investigator per 60,000 enrollees, except in the case of a managed long-term care plan, which must employ one full-time investigator per 6,000 enrollees. MMCOs may propose to OMIG alternative minimum staffing levels if such staffing levels would be no less effective than required by this Subpart.
  • SIU Investigator Qualifications: SIU investigators must either possess: (i) a minimum of 5 years’ experience in the healthcare field working in fraud, waste, and abuse investigations and audits, a minimum of 5 years of insurance claims investigation experience or professional investigation experience with law enforcement agencies, or 7 years of professional investigation experience involving economic or insurance related matters; (ii) an associate’s or bachelor’s degree in criminal justice or a related field; or (iii) employment as an investigator in an MMCO’s SIU on or before this Subpart’s effective date.
  • SIU Work Plan: At least annually, SIUs most develop a work plan detailing the activities they plan to complete that upcoming year. The work plan may be a standalone document or part of the compliance program described in Subpart 521-1
  • Delegation: A MMCO may delegate all or part of the functions of the SIU, however, the MMCO will be ultimately responsible for meeting the requirements of this Subpart.

MMCO Audits and Investigations - Section 521-2.4(c)

Through its respective SIUs and in coordination with the MMCOs’ compliance officers, MMCOs must audit, investigate, or review fraud, waste, and abuse cases related to its participation in the Medicaid Program. Such audits, investigations, and review must involve at least one percent or more of the aggregate of the Medicaid Program claims it pays to providers and subcontractors and must be of the MMCO’s clinical and billing records.

Fraud, Waste, and Abuse Prevention Plan Requirements - Section 521-2.4(i)

MMCOs must develop and submit to OMIG a fraud, waste, and abuse prevention plan within 90 calendar days of the effective date of this Subpart or of signing a new contract with the Department of Social Services to begin participation as an MMCO. MMCOs must implement a fraud, waste, and abuse prevention plan within 180 calendar days from the date the MMCO executes its contract with the Department of Social Services to participate as a MMCO and develops its plan pursuant to this section. Such fraud, waste, and abuse prevention plans must include the following:

  • A description of the MMCO’s program for preventing and detecting fraud, waste, and abuse.
  • A description, if applicable, of the SIU’s organization, including: Titles and job descriptions of the investigators, investigative supervisors, and other staff; the minimum qualifications for employment in the positions; the geographical location and assigned location of each investigator and investigative supervisor; the support staff and other physical resources available to the SIU; and the supervisory and reporting structure within the SIU and between the SIU and the management of the MMCO.
  • A detailed description of the roles, responsibilities, and interaction between SIU and the MMCO’s compliance officer; the MMCO’s legal department; the claims, quality, member services, utilization review, compliant procedures, and underwriting functions of the MMCO; and OMIG, the Department of Social Services, and MFCU.
  • The MMCO’s policies and procedures as further detailed above under Compliance Program and in Subpart 521-1.4(a).
  • The criteria for internal referral of a case to the SIU for evaluation. In addition, the plan must include the criteria SIU uses for reporting cases of potential fraud, waste, and abuse to the Department of Social Services and OMIG.

MMCO Annual Reports - Section 521-2.4(j)

After January 31 of each calendar year, each MMCO must file an annual report (on a form to be developed by the Department of Social Services) for the preceding year that must include at least the following:

  • A description of the MMCO’s experience, performance, and cost effectiveness in implementing the fraud, waste, and abuse program.
  • The MMCO’s proposals for modifications to its fraud, waste, and abuse prevention program and plan to amend its operations to remedy deficiencies.
  • A summary of the MMCO’s SIU staffing.
  • A summary of the MMCO’s subcontractors or vendors who perform audit investigation or review functions.
  • The total number of reported cases of potential fraud, waste, or abuse identified by the MMCO.
  • The MMCO’s SIU work plan for the next calendar year.
  • The results of service verification reviews as specified in the MMCO’s contract with the Department of Social Services.

Looking Forward:

If enacted, Part 521-2 will compel MMCOs to examine and, potentially, restructure their fraud, waste, and abuse prevention plans. OMIG is accepting public comment on these proposed regulations through September 11, 2022. You may submit written comment via email to Michael T. D’Allaird at [email protected].

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Cody Keetch


Cody Keetch is an Associate at Mintz who focuses his practice on health care transactions and advises health care organizations on regulatory, compliance, and governance matters. He also represents clients in the technology and life sciences industries.
Jeannie Mancheno is an Associate at Mintz who focuses her practice on health care transactional, regulatory, and compliance matters. She represents clients across the health care industry, including hospitals, physician organizations, health care systems, and long-term and urgent care providers.