Crain’s Health Pulse on the OMIG Bill

January 12, 2023

Recently, during a background interview with the author of the CHP article (below), I suggested she speak with Linda Clark, the attorney retained by our association to assist us refute the concerns that were raised to us last month as we discussed the bill with representatives from the Governor’s Office, and pushed for enactment.  

Both Linda and Allegra did a fantastic job summarizing the problem that was the subject of the letter we drafted and circulated for sign on earlier this year where  47  organizations came together to push for reform of the OMIG audit process. 

With the Governor’s veto, we have more work to do.  As the NYS Council works with our co-leads from COMPA and CP of NYS, we will need your assistance to obtain a different outcome in 2023.  The NYS Council will not rest until many of the significant audit problems remaining for Medicaid providers across the state, are addressed.  

From today’s Crain’s Health Pulse, 1/12:

After Hochul vetoes bill, advocates renew focus on Medicaid audit reform

Gov. Kathy Hochul struck down a bill on Dec. 9 that Medicaid providers and advocates hoped would limit the state Office of the Medicaid Inspector General’s ability to impose huge fines on providers for clerical or human errors discovered during audits. Now, advocates have renewed their focus on how to fix issues the bill was meant to address.

S.4486B/A.7889A passed the Senate and Assembly unanimously in May. But in a memo issued to the Assembly on Dec. 9, the governor said passing the bill would restrict auditors’ abilities to enforce Medicaid rules and standards and to detect fraud.

“These limitations would prevent the state from collecting the overpayments, which federal law and audits require. It would do so without relieving the state’s obligations from paying the federal government, leaving the state to absorb the cost,” the memo reads.

Health care providers such as hospitals, outpatient clinics and substance use treatment programs that work with Medicaid recipients are audited for compliance by the Office of the Medicaid Inspector General. Providers can be charged if errors are found, and they lose Medicaid reimbursement funding.

Experts say the auditors’ current process allows providers to be fined at an exorbitant rate compared to the gravity of the errors the auditors find.

When auditors find an error in a claim for a service, they can use a process called extrapolation to apply an error rate to a large number of claims for that service, said Linda Clark, leader of the health care controversies team and partner at Midtown law firm Barclay Damon. A human error such as putting the wrong reference number down on paperwork can result in the provider losing millions of dollars and can force providers out of business, she said.

“We are almost always talking about meaningless, nonmaterial, clerical errors that have nothing to do with whether or not Medicaid should have paid the claim, or whether or not the person got the services,” she said.

Medicaid audits can end programs, including those run by safety net providers that care for a high percentage of Medicaid patients. Clark pointed to a Beth Israel opioid treatment clinic that closed in 2020 after OMIG fined it nearly $8 million after an audit.

The bill, introduced by state Sen. Pete Harckham in February 2021, would have eased the potential impact on providers, Clark said.

If it passed, OMIG would have been required to wait at least 60 days after issuing a final audit report before starting to recover any overpayments, and it would have to provide at least 10 days’ notice to the provider in writing. The legislation also would have prohibited OMIG from auditing the same claims unless there is new information or a different scope of investigation.

According to its text, the bill would have required OMIG to apply laws in its audit that were in place at the time the claim occurred and prohibited OMIG from recovering money based on administrative or technical issues in the claim, unless the provider did not correct the error within 30 days.

“The bill was really designed to rein in some of the outlier practices that had been identified by the Legislature as really being unfair and not in keeping with the spirit … of OMIG’s charge, which is program integrity,” Clark said.

Allegra Schorr, president of the Coalition of Medication-Assisted Treatment Providers and Advocates, whose member programs treat more than 41,000 New Yorkers, emphasized that pushing for the bill did not mean providers or advocates were against audits, and she acknowledged the importance of audits in finding fraud.

The issue at hand is about fairness in the audit process, she said.

Schorr added that the process could have been abnormally tough on providers in the past few years because of how services were provided during the pandemic—changes that audits might not have accounted for. A form that might have previously required a patient’s in-person signature before the pandemic might not have undergone the same process if the service changed and was delivered over telehealth, she said by way of example. But an audit wouldn’t necessarily capture that change, she said.

“This bill would have put some real important clarity around what the protocols should be,” Schorr said. “With the veto, we don’t have that now. I’m quite concerned because the providers that provide information to our most vulnerable patients don’t have those guidelines to lean on.”

Now that Hochul has vetoed the bill, the New York State Council for Community Behavioral Healthcare, the Coalition of Medication-Assisted Treatment Providers and Advocates and Cerebral Palsy Associations of New York State have issued a joint statement calling on the governor to convene a meeting of Medicaid provider organizations’ representatives to discuss the problems the bill addressed and develop a plan of action.

Schorr said she hoped the bill would be reintroduced.

In her memo to the Assembly, the governor directed OMIG to take steps to address the concerns within the bill.

Hochul encouraged the office to engage with the provider community for their input on concerns and perform a review of program integrity processes and identify areas for improvement. In addition, she encouraged the office to commit to performing audits in a way that considers the possible financial impact on providers and assess opportunities to include more reporting elements in OMIG’s annual report. —Jacqueline Neber