Governor Cuomo Names New Medicaid Inspector General as the New York Legislature Passes New Legislation Governing Health Care Audits

On July 8, New York Governor Andrew Cuomo nominated James Cox, a former high-level federal auditor, as New York’s new Medicaid Inspector General.

The nomination is seen as an important step in increasing New York’s crackdown on Medicaid fraud. Medicaid Fraud has been a major problem for the state of New York and its $53 billion Medicaid system. Experts estimate that fraud accounts for 5 percent or more of Medicaid payments, or more than $2.5 billion.

Cox, who will take over the post pending confirmation by the Senate, previously worked for the US Health and Human Services’ Office of Inspector General for 23 years, most recently as regional inspector general for Region 5, consisting of six Midwestern states.
Cox replaces James Sheehan, who became the state’s first Medicaid Inspector General in 2007. Sheehan, whose office recovered over $1 billion in improper payments and fines, was dismissed by Governor Cuomo after being widely criticized by health-industry leaders for purportedly having a penchant to treat payment and billing errors as fraud and abuse, even in instances in which the errors resulted from inadvertence without fraudulent intent.

Recent legislation, S.3184-A and A.5686-A, passed by both houses of the New York Legislature, reflects the concerns of the health-industry leaders. The most substantive changes arise from the enactment of Public Health Law Sections 37 and 38. To address overly aggressive prosecutions of billing errors as fraud and abuse, Sections 37 and 38 afford health care providers with additional rights in Office of Medicaid Inspector General (“OMIG”) audits and recoupment investigations.

The most important protections include:

• OMIG no longer will recover from a provider for administrative or technical defects in procedure or documentation in the absence of underlying intent to falsify or defraud, regarding claims for payment for medically necessary care, services and supplies, without first giving the provider 30 days to cure the defects.

• OMIG may not recover overpayments until at least 60 days after the issuance of a final draft report or notice of agency action.

• Any claim audited by OMIG within the last three years will not be re-audited by OMIG unless new information and good cause exists to support the position that the previous audit was erroneous or the new audit is significantly different that the previous audit.

• Irrespective of the whether an OMIG audit relates to claims arising prior to or following the effective date of the new legislation, for any audit initiated on or after October 1, 2011, OMIG will be required to apply Sections 37 and 38 (with the attendant protections to the providers thereunder).

• OMIG must provide at an audit exit conference or in any draft audit findings issued or to be issued to provider, a detailed explanation of the extrapolation method employed, including errors found in a sample of claims to a larger universe of claims, the specific claims included in the sample and the results of the sample, any assumptions made about the accuracy and reliability of the sample and the steps used by OMIG to calculate the overpayment and any applicable offset based on the sample results.

• OMIG will provide written notice of an investigation at least 5 days prior to any interview, which will include the following information: potential for referral for a criminal investigation; individual’s right to be accompanied by counsel; contact information for legal services; the individual’s right to decline the interview or refuse to answer any questions without loss of benefits; and the right to a fair hearing if the investigation results in a judgment of incorrect payment.

• OMIG must provide written notice upon completion of an investigation at least 30 days prior to commencing an action for recovery or adjustment, the notice must contain: the evidence relied upon; the factual conclusions; and the individual’s right to request a fair hearing to challenge the outcome of the investigation.

If, as expected, Governor Cuomo signs the legislation, it will become effective on October 1, 2011 and will apply to any matter commencing as of, or pending on, such date.

For more information, please contact Adrienne Dresevic, Esq., Jessica L. Gustafson, Esq., Esq., Robert S. Iwrey, Esq., Carey F. Kalmowitz, Esq. or Abby Pendleton, Esq. at (212) 734-0128 or (248) 996-8510 or visit the HLP website.

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