PART 1007—STATE MEDICAID FRAUD CONTROL UNITS Authority: 42 U.S.C. 1302, 1396a(a)(61), 1396b(a)(6), 1396b(b)(3), and 1396b(q). Source: 84 FR 10713, Mar. 22, 2019, unless otherwise noted. Subpart A—General Provisions and Definitions § 1007.1 Definitions. As used in this part, unless otherwise indicated by the context: Abuse of patients or residents Board and care facility (1) Nursing care services provided by, or under the supervision of, a registered nurse, licensed practical nurse, or licensed nursing assistant. (2) A substantial amount of personal care services that assist residents with the activities of daily living, including personal hygiene, dressing, bathing, eating, toileting, ambulation, transfer, positioning, self-medication, body care, travel to medical services, essential shopping, meal preparation, laundry, and housework. Data mining Director Exclusive effort Fraud Full-time employee Health care facility Misappropriation of patient or resident funds Neglect of patients or residents Part-time employee Professional employee Program abuse Provider (1) An individual or entity that furnishes or arranges for the furnishing of items or services for which payment is claimed under Medicaid, including an individual or entity in a managed care network; (2) An individual or entity that is required to enroll in a State Medicaid program, such as an ordering, prescribing, or referring physician; or (3) Any individual or entity that may operate as a health care provider under applicable State law. Unit § 1007.3 Statutory basis and organization of rule. (a) Statutory basis. (b) Organization of this part. Subpart B—Requirements for Certification § 1007.5 Single, identifiable entity requirements of Unit. (a) A Unit must be a single, identifiable entity of the State government. (b) To be considered a single, identifiable entity of the State government, the Unit must: (1) Be a single organization reporting to the Unit director; (2) Operate under a budget that is separate from that of its parent agency; and (3) Have the headquarters office and any field offices each in their own contiguous space, unless the Unit demonstrates to OIG that circumstances warrant a different arrangement for certain employees. § 1007.7 Prosecutorial authority requirements of Unit. A Unit must be organized according to one of the following three options related to a Unit's prosecutorial authority: (a) The Unit is in the office of the State Attorney General or another department of State government that has statewide authority to prosecute individuals for violations of criminal laws with respect to fraud and patient or resident abuse or neglect in the provision or administration of medical assistance under a State plan implementing Title XIX of the Act. (b) If there is no State agency with statewide authority and capability for criminal fraud or patient or resident abuse or neglect prosecutions, the Unit has established formal written procedures ensuring that the Unit refers suspected cases of criminal fraud in the State Medicaid program or of patient or resident abuse and neglect to the appropriate prosecuting authority or authorities, and coordinates with and assists such authority or authorities in the prosecution of such cases. (c) The Unit has a formal working relationship with the office of the State Attorney General, or another office with statewide prosecutorial authority, and has formal written procedures for referring to the State Attorney General or other office suspected criminal violations and for effective coordination of the activities of both entities relating to the detection, investigation, and prosecution of those violations relating to the State Medicaid program. Under this working relationship, the office of the State Attorney General, or other office, must agree to assume responsibility for prosecuting alleged criminal violations referred to it by the Unit. However, if the State Attorney General finds that another prosecuting authority has the demonstrated capacity, experience, and willingness to prosecute an alleged violation, he or she may refer a case to that prosecuting authority, as long as the office of the State Attorney General maintains oversight responsibility for the prosecution and for coordination between the Unit and the prosecuting authority. § 1007.9 Relationship and agreement between Unit and Medicaid agency. (a) The Unit must be separate and distinct from the Medicaid agency. (b) No official of the Medicaid agency will have authority to review the activities of the Unit or to review or overrule the referral of a suspected criminal violation to an appropriate prosecuting authority. (c) The Unit will not receive funds paid under this part either from or through the Medicaid agency. (d) The Unit must enter into a written agreement with the Medicaid agency under which: (1) The Medicaid agency will agree to comply with all requirements of § 455.21(a) of this title; (2) The Unit will agree to comply with the requirements of § 1007.11(c) of this title; and (3) The Medicaid agency and the Unit will agree to: (i) Establish a practice of regular meetings or communication between the two entities; (ii) Establish procedures for how they will coordinate their efforts; (iii) Establish procedures for §§ 1007.9(e) through 1007.9(h) of this title; (iv) Establish procedures by which the Unit will receive referrals of potential fraud from managed care organizations, if applicable, either directly or through the Medicaid agency, as required at § 438.608(a)(7) of this title; and (v) Review and, as necessary, update the agreement no less frequently than every five (5) years to ensure that the agreement reflects current law and practice. (e)(1) The Unit may refer any provider with respect to which there is pending an investigation of a credible allegation of fraud under the Medicaid program to the Medicaid agency for payment suspension in whole or part under § 455.23 of this title. (2) Referrals may be brief but must be in writing and include sufficient information to allow the Medicaid agency to identify the provider and to explain the credible allegations forming the grounds for the payment suspension. (f) Any request by the Unit to the Medicaid agency to delay notification to the provider of a payment suspension under § 455.23 of this title must be made promptly in writing. (g) The Unit should reach a decision on whether to accept a case referred by the Medicaid agency in a timely fashion. When the Unit accepts or declines a case referred by the Medicaid agency, the Unit promptly notifies the Medicaid agency in writing of the acceptance or declination of the case. (h) Upon request from the Medicaid agency on a quarterly basis under § 455.23(d)(3)(ii), the Unit will certify that any matter accepted on the basis of a referral continues to be under investigation, thus warranting continuation of the payment suspension. § 1007.11 Duties and responsibilities of Unit. (a) The Unit will conduct a statewide program for investigating and prosecuting (or referring for prosecution) violations of all applicable State laws, including criminal statutes as well as civil false claims statutes or other civil authorities, pertaining to the following: (1) Fraud in the administration of the Medicaid program, the provision of medical assistance, or the activities of providers. (2) Fraud in any aspect of the provision of health care services and activities of providers of such services under any Federal health care program (as defined in section 1128B(f)(1)of the Act), if the Unit obtains the written approval of the Inspector General of the relevant agency and the suspected fraud or violation of law in such case or investigation is primarily related to the State Medicaid program. (b)(1) The Unit will also review complaints alleging abuse or neglect of patients or residents in health care facilities receiving payments under Medicaid and may review complaints of the misappropriation of funds or property of patients or residents of such facilities. (2) At the option of the Unit, it may review complaints of abuse or neglect, including misappropriation of funds or property, of patients or residents of board and care facilities, regardless of whether payment to such facilities is made under Medicaid. (3) If the initial review of the complaint indicates substantial potential for criminal prosecution, the Unit will investigate the complaint or refer it to an appropriate criminal investigative or prosecutorial authority. (4) If the initial review does not indicate a substantial potential for criminal prosecution, the Unit will, if appropriate, refer the complaint to the proper Federal, State, or local agency. (c) If the Unit, in carrying out its duties and responsibilities under paragraphs (a) and (b) of this section, discovers that overpayments have been made to a health care facility or other provider, the Unit will either recover such overpayment as part of its resolution of a fraud case or refer the matter to the appropriate State agency for collection. (d) Where a prosecuting authority other than the Unit is to assume responsibility for the prosecution of a case investigated by the Unit, the Unit will ensure that those responsible for the prosecutorial decision and the preparation of the case for trial have the fullest possible opportunity to participate in the investigation from its inception and will provide all necessary assistance to the prosecuting authority throughout all resulting prosecutions. (e)(1) The Unit, if requested, will make available to OIG investigators and attorneys, or to other Federal investigators and prosecutors, all information in the Unit's possession concerning investigations or prosecutions conducted by the Unit. (2) The Unit will coordinate with OIG investigators and attorneys, or with other Federal investigators and prosecutors, on any Unit cases involving the same suspects or allegations that are also under investigation or prosecution by OIG or other Federal investigators or prosecutors. (3) The Unit will establish a practice of regular Unit meetings or communication with OIG investigators and Federal prosecutors. (4) When the Unit lacks the authority or resources to pursue a case, including for allegations of Medicare fraud and for civil false claims actions in a State without a civil false claims act or other State authority, the Unit will make appropriate referrals to OIG investigators and attorneys or other Federal investigators or prosecutors. (5) The Unit will establish written policy consistent with paragraphs (e)(1) through (4) of this section. (f) The Unit will guard the privacy rights of all beneficiaries and other individuals whose data is under the Unit's control and will provide adequate safeguards to protect sensitive information and data under the Unit's control. (g)(1) The Unit will transmit to OIG pertinent information on all convictions, including charging documents, plea agreements, and sentencing orders, for purposes of program exclusion under section 1128 of the Act. (2) Convictions include those obtained either by Unit prosecutors or non-Unit prosecutors in any case investigated by the Unit. (3) Such information will be transmitted to OIG within 30 days of sentencing, or as soon as practicable if the Unit encounters delays in receiving the necessary information from the court. § 1007.13 Staffing requirements of Unit. (a) The Unit will employ sufficient professional, administrative, and support staff to carry out its duties and responsibilities in an effective and efficient manner. (b) The Unit will employ individuals from each of the following categories of professional employees, whose exclusive effort, as defined in § 1007.1, is devoted to the work of the Unit: (1) One or more attorneys capable of prosecuting the Unit's health care fraud or criminal cases and capable of giving informed advice on applicable law and procedures and providing effective prosecution or liaison with other prosecutors; (2) One or more experienced auditors capable of reviewing financial records and advising or assisting in the investigation of alleged health care fraud and patient or resident abuse and neglect; and (3) One or more investigators capable of conducting investigations of health care fraud and patient or resident abuse and neglect matters, including a senior investigator who is capable of supervising and directing the investigative activities of the Unit. (c) The Unit will employ a director, as defined in § 1007.1, who supervises all Unit employees. (d) Professional employees: (1) Will devote their exclusive effort to the work of the Unit, as defined in § 1007.1 and except as provided in paragraphs (d)(2) and (3) of this section; (2) May be employed outside the Unit during nonduty hours, only if the employee is not: (i) Employed with a State agency (other than the Unit itself) or its contractors; or (ii) Employed with an entity whose mission poses a conflict of interest with Unit function and duties; (3) May perform non-Unit assignments for the State government only to the extent that such duties are limited in duration; and (4) Will be under the direction and supervision of the Unit director. (e) The Unit may employ administrative and support staff, such as paralegals, information technology personnel, interns, and secretaries, who may be full-time or part-time employees and must report to the Unit director or other Unit supervisor. (f) The Unit will employ, or have available to it, individuals who are knowledgeable about the provision of medical assistance under Title XIX of the Act and about the operations of health care providers. (g)(1) The Unit may employ, or have available through consultant agreements or other contractual arrangements, individuals who have forensic or other specialized skills that support the investigation and prosecution of cases. (2) The Unit may not, through consultant agreements or other contractual arrangements, rely on individuals not employed directly by the Unit for the investigation or prosecution of cases. (h) The Unit will provide training for its professional employees for the purpose of establishing and maintaining proficiency in Medicaid fraud and patient or resident abuse and neglect matters. § 1007.15 Establishment and certification of Unit. (a) Initial application. (1) A description of the applicant's organization, structure, and location within State government, and a statement of whether it seeks certification under § 1007.7(a), (b), or (c); (2) A statement from the State Attorney General that the applicant has authority to carry out the functions and responsibilities set forth in Subpart B. If the applicant seeks certification under § 1007.7(b), the statement must also specify either that: (i) There is no State agency with the authority to exercise statewide prosecuting authority for the violations with which the Unit is concerned, or (ii) Although the State Attorney General may have common law authority for statewide criminal prosecutions, he or she has not exercised that authority; (3) A copy of whatever memorandum of agreement, regulation, or other document sets forth the formal procedures required under § 1007.7(b), or the formal working relationship and procedures required under § 1007.7(c); (4) A copy of the agreement with the Medicaid agency required under §§ 1007.9 and 455.21(c); (5) A statement of the procedures to be followed in carrying out the functions and responsibilities of this part; (6) A proposed budget for the 12-month period for which certification is sought; and (7) Current and projected staffing, including the names, education, and experience of all senior professional employees already employed and job descriptions, with minimum qualifications, for all professional positions. (b) Basis for, and notification of, certification. (2) OIG will certify a Unit only if OIG specifically approves the applicant's formal written procedures under § 1007.7(b) or (c), if either of those provisions is applicable. (3) If the application is not approved, the applicant may submit a revised application at any time. (4) OIG will certify a Unit that meets the requirements of this Subpart B for 12 months. § 1007.17 Annual recertification of Unit. (a) Information required annually for recertification. (1) Reapplication for recertification. (i) A brief narrative that evaluates the Unit's performance, describes any specific problems it has had in connection with the procedures and agreements required under this part, and discusses any other matters that have impaired its effectiveness. The narrative should include any extended investigative authority approvals obtained pursuant to § 1007.11(a)(2). (ii) For those Units approved to conduct data mining under § 1007.20, all costs expended by the Unit attributed to data mining activities; the amount of staff time devoted to data mining activities; the number of cases generated from those activities; the outcome and status of those cases, including the expected and actual monetary recoveries (both Federal and non-Federal share); and any other relevant indicia of return on investment from such activities. (iii) Information requested by OIG to assess compliance with this part and adherence to MFCU performance standards, including any significant changes in the information or documentation provided to OIG in the previous reporting period. (2) Statistical reporting. (i) Unit staffing. (ii) Caseload. (iii) Criminal case outcomes. (iv) Civil case outcomes. (v) Collections. (vi) Referrals. (b) Other information reviewed for recertification. (1) Information obtained through onsite reviews and (2) Other information OIG deems necessary or warranted. (c) Basis for recertification. (1) Unit's compliance with this part and other Federal regulations, including those specified in § 1007.23; (2) Unit's compliance with OIG policy transmittals; (3) Unit's adherence to MFCU performance standards as published in the Federal Register (4) Unit's effectiveness in using its resources in investigating cases of possible fraud in the administration of the Medicaid program, the provision of medical assistance, or the activities of providers of medical assistance under the State Medicaid plan, and in prosecuting cases or cooperating with the prosecuting authorities; and (5) Unit's effectiveness in using its resources in reviewing and investigating, referring for investigation or prosecution, or criminally prosecuting complaints alleging abuse or neglect of patients or residents in health care facilities receiving payments under the State Medicaid plan and, at the Unit's option, in board and care facilities. (d) Notification. (1) Approval subject to conditions. (2) Written explanation for denials. (e) Reconsideration of denial of recertification. (2) Within 30 days of receipt of the request for reconsideration, OIG will provide a final decision in writing, explaining its basis for approving or denying the reconsideration of recertification. [84 FR 10713, Mar. 22, 2019, as amended at 89 FR 80070, Oct. 2, 2024] Subpart C—Federal Financial Participation (FFP) § 1007.19 FFP rate and eligible FFP costs. (a) Rate of FFP. (2) Beginning with the 13th quarter of operation, the Secretary must reimburse 75 percent of allowable costs incurred by a certified Unit. (b) Retroactive certification. (c) Total amount of FFP. (d) Costs eligible for FFP. (2) Establishment costs are limited to clearly identifiable costs of personnel that meet the requirements of § 1007.13 of this part. (e) Costs not eligible for FFP. (1) The investigation of cases involving program abuse or other failures to comply with applicable laws and regulations, if these cases do not involve substantial allegations or other indications of fraud, as described in § 1007.11(a) of this part; (2) Routine verification with beneficiaries of whether services billed by providers were actually received, or, except as provided in § 1007.20, efforts to identify situations in which a question of fraud may exist by the screening of claims and analysis of patterns and practice that involve data mining as defined in § 1007.1. (3) The routine notification of providers that fraudulent claims may be punished under Federal or State law; (4) The performance of any audit or investigation, any professional legal function, or any criminal, civil or administrative prosecution of suspected providers by a person who does not meet the professional employee requirements in § 1007.13(d); (5) The investigation or prosecution of fraud cases involving a beneficiary's eligibility for benefits, unless the suspected fraud cases also involve conspiracy with a provider; (6) Any payment, direct or indirect, from the Unit to the Medicaid agency, other than payments for the salaries of employees on detail to the Unit; or (7) Temporary duties performed by professional employees that are not required functions and responsibilities of the Unit, as described at § 1007.13(d)(3). § 1007.20 Circumstances of permissible data mining. (a) Notwithstanding § 1007.19(e)(2), a Unit may engage in data mining as defined in this part and receive FFP only under the following conditions: (1) The Unit identifies the methods of coordination between the Unit and the Medicaid agency, the individuals serving as primary points of contact for data mining, as well as the contact information, title, and office of such individuals; (2) Unit employees engaged in data mining receive specialized training in data mining techniques; (3) The Unit describes how it will comply with paragraphs (a)(1) and (2) of this section as part of the agreement required by § 1007.9(d); and (4) OIG, in consultation with CMS, approves in advance the provisions of the agreement as defined in paragraph (a)(3) of this section. (i) OIG will act on a request from a Unit for review and approval of the agreement within 90 days after receipt of a written request, or the request shall be considered approved if OIG fails to respond within 90 days after receipt of the written request. (ii) If OIG requests additional information in writing, the 90-day period for OIG action on the request begins on the day OIG receives the information from the Unit. (iii) The approval is for 3 years. (iv) A Unit may request renewal of its data-mining approval for additional 3-year periods by submitting a written request for renewal to OIG, along with an updated agreement with the Medicaid agency. § 1007.21 Disallowance of claims for FFP. (a) Notice of disallowance and of right to reconsideration. (b) Reconsideration of disallowance. (2) To request a reconsideration from the Principal Deputy Inspector General, the Unit must follow the requirements in 42 CFR 430.42(b)(2) and submit all required information to the Principal Deputy Inspector General. Copies should be sent via registered or certified mail to the Principal Deputy Inspector General. (3) The Unit may request to retain FFP during the reconsideration of the disallowance under section 1116(e) of the Act, in accordance with 42 CFR 433.38. (4) The Unit is not required to request reconsideration before seeking review from the Departmental Appeals Board. (5) The Unit may also seek reconsideration, and following the reconsideration decision, request a review from the Departmental Appeals Board. (6) If the Unit elects reconsideration, the reconsideration process must be completed or withdrawn before requesting review by the Departmental Appeals Board. (c) Procedures for reconsideration of a disallowance. (2) After consideration of the policies and factual matters pertinent to the issues in question, the Principal Deputy Inspector General shall, within 60 days from the date of receipt of the request for reconsideration, issue a written decision or a request for additional information as described in paragraph (c)(3) of this section. (3) At the Principal Deputy Inspector General's option, OIG may request from the Unit any additional information or documents necessary to make a decision. The request for additional information must be sent via registered or certified mail to establish the date the request was sent by OIG and received by the Unit. (4) Within 30 days after receipt of the request for additional information, the Unit must submit to the Principal Deputy Inspector General all requested documents and materials. (i) If the Principal Deputy Inspector General finds that the materials are not in readily reviewable form or that additional information is needed, he or she shall notify the Unit via registered or certified mail that it has 15 business days from the date of receipt of the notice to submit the readily reviewable or additional materials. (ii) If the Unit does not provide the necessary materials within 15 business days from the date of receipt of such notice, the Principal Deputy Inspector General shall affirm the disallowance in a final reconsideration decision issued within 15 days from the due date of additional information from the Unit. (5) If additional documentation is provided in readily reviewable form under paragraph (c)(4) of this section, the Principal Deputy Inspector General shall issue a written decision within 60 days from the due date of such information. (6) The final written decision shall constitute final OIG administrative action on the reconsideration and shall be (within 15 business days of the decision) mailed to the Unit via registered or certified mail to establish the date the reconsideration decision was received by the Unit. (7) If the Principal Deputy Inspector General does not issue a decision within 60 days from the date of receipt of the request for reconsideration or the date of receipt of the requested additional information, the disallowance shall be deemed to be affirmed. (8) No section of this regulation shall be interpreted as waiving OIG's right to assert any provision or exemption under the Freedom of Information Act. (d) Withdrawal of a request for reconsideration of a disallowance. (2) Within 60 days after OIG's receipt of a Unit's withdrawal request, a Unit may, in accordance with (f)(2) of this section, submit a notice of appeal to the Departmental Appeals Board. (e) Implementation of decisions for reconsideration of a disallowance. (2) If the reconsideration decision requires an adjustment of FFP, either upward or downward, a subsequent grant action will be made in the amount of such increase or decrease. (3) Within 60 days after receipt of a reconsideration decision from OIG, a Unit may, in accordance with paragraph (f) of this section, submit a notice of appeal to the Departmental Appeals Board. (f) Appeal of disallowance. (2) A Unit that wishes to appeal a disallowance to the Departmental Appeals Board must follow the requirements in 42 CFR 430.42(f)(2). (3) The appeals procedures are those set forth in 45 CFR part 16 for Medicaid and for many other programs, including the Units, administered by the Department. (4) The Departmental Appeals Board may affirm the disallowance, reverse the disallowance, modify the disallowance, or remand the disallowance to OIG for further consideration. (5) The Departmental Appeals Board will issue a final written decision to the Unit consistent with 45 CFR part 16. (6) If the appeal decision requires an adjustment of FFP, either upward or downward, a subsequent grant action will be made in the amount of such increase or decrease. Subpart D—Other Provisions § 1007.23 Other applicable HHS regulations. The following regulations from 45 CFR, subtitle A, apply to grants under this part: (a) Part 16—Procedures of the Departmental Grant Appeals Board. (b) Part 75—Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards. (c) Part 80—Nondiscrimination under Programs Receiving Federal Assistance through HHS, Effectuation of Title VI of the Civil Rights Act of 1964. (d) Part 81—Practice and Procedure for Hearings under 45 CFR part 80. (e) Part 84—Nondiscrimination on the Basis of Handicap in Programs and Activities Receiving Federal Financial Assistance. (f) Part 91—Nondiscrimination on the Basis of Age in Programs or Activities Receiving Federal Financial Assistance from HHS.