New Report Finds Excluded Providers Still Participating In Medicaid Programs

Richard P. Kusserow | August 2015

On August 5, 2015, the U.S. Department of Health and Human Services Office of Inspector General (OIG) released a surprising report that found healthcare providers are terminated from one state but continue to provide services in another state. The study, conducted by the Office of Evaluation and Inspection (OEI) under the OIG found that 12 percent of terminated Medicaid providers continue to participate in other state Medicaid programs.

This is surprising in light of the authority granted to state Medicaid programs by the Patient Protection and Affordable Care Act (known in the short form as “ACA”). Under ACA, state Medicaid programs have the authority to reciprocate an exclusion imposed by another state Medicaid program.  Therefore, if a provider is excluded by a state Medicaid program for fraud, integrity or quality of care issues, every other state Medicaid program can also exclude that provider, even if that provider has never rendered or ordered services in their state. The ACA provision was in response to incidents that occurred when a second State’s Medicaid program was vulnerable to fraud, waste or abuse committed by a terminated provider, in cases where that provider was not also terminated by the OIG.

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OEI identified 94 terminated providers that billed Medicaid a total of $7.4 million for services that were performed after those providers were terminated with cause by another state Medicaid program. This is not a new issue identified by the OIG. In 2014 the agency found weaknesses in the implementation of this ACA mandate. The vulnerabilities previously identified continue to permit terminated providers by one state Medicaid program to continue providing and billing for services in other state Medicaid programs.  The failure of the state Medicaid programs to meet the mandates was found to be an ongoing failure by the Centers for Medicare & Medicaid Services (CMS) to collect complete and reliable termination data, such as identifying all terminations for cause, as well as differentiating such terminations from other administrative actions reported by the state Medicaid programs.

Carrie Kusserow, an experienced healthcare compliance consultant, stated that “the problem is not limited to the amount of money inappropriately paid by Medicaid to terminated providers.  In many cases, the cause of the termination related to improper care of beneficiaries due to impairments, ignorance, or carelessness by the provider.  By continuing services paid by Medicaid, they are placing beneficiaries at further risk.”

Another issue explaining state Medicaid programs inability to stop terminated providers arises from the fact that 25 of the 41 states that used managed care to deliver Medicaid services did not require these providers rendering managed care services to be directly enrolled with the state Medicaid agency.  As such, if a state has not directly enrolled a provider, it cannot terminate that provider, and it may not even be aware that the provider is participating in its Medicaid program.  Furthermore, a common misunderstanding by states is that as long as the provider has an active license from a relevant state board then the Medicaid agency should defer to their judgment and not terminate the provider; this is wrong.

OEI’s methodology to conduct the review included directly contacting the state Medicaid agencies to review their Medicaid providers terminated for cause and to determine whether those terminated providers were still participating in any Medicaid fee-for-service or managed care program. Then, they identified those who were terminated but continued to perform services and billed Medicaid in another state. Additionally, OEI calculated the amount that Medicaid paid each provider for services performed after their termination for cause from another State.  Jillian Bower, an expert on sanction screening warns “even though the OIG cites weaknesses, parties will still have exposure to penalties.  Screening against the OIG’s List of Excluded Individuals and Entities and the General Services Administration’s debarments list is a must do and also your state’s Medicaid sanction database, if that State has one.” She further notes that “in light of the OIG’s report, it is advisable to check any provider who has recently moved from another State with any sanction database that State may have.”

The OIG has called upon CMS to move ahead with developing a comprehensive data source of providers terminated for cause.  Until that is done, the state Medicaid agencies will continue to be handicapped in meeting the legal mandates regarding terminated providers. CMS concurred with the OIG restated recommendations from 2014 that CMS:

  1. Require State Medicaid agencies to report all terminations for cause.
  2. Work with States to develop uniform terminology to clearly denote terminations for cause.
  3. Require State Medicaid programs enroll all providers participating in Medicaid managed care.
  4. Furnish State guidance that termination isn’t contingent on the provider’s active licensure status.


About the Author

Richard P. Kusserow established Strategic Management Services, LLC, after retiring from being the DHHS Inspector General, and has assisted over 3,000 health care organizations and entities in developing, implementing and assessing compliance programs.