Appendix E - 42 CFR 455

§§ 447.536–447.550
§§ 447.536–447.550

42 CFR Ch. IV (10–1–06 Edition)
(1) Report fraud and abuse information to the Department; and
(2) Have a method to verify whether
services reimbursed by Medicaid were
actually furnished to recipients.
(b) Subpart B implements sections
1124, 1126, 1902(a)(36), 1903(i)(2), and
1903(n) of the Act. It requires that providers and fiscal agents must agree to
disclose ownership and control information to the Medicaid State agency.

[Reserved]

PART 455—PROGRAM INTEGRITY:
MEDICAID
Sec.
455.1
455.2
455.3

Basis and scope.
Definitions.
Other applicable regulations.

Subpart A—Medicaid Agency Fraud
Detection and Investigation Program

[51 FR 34787, Sept. 30, 1986]

455.12 State plan requirement.
455.13 Methods for identification, investigation, and referral.
455.14 Preliminary investigation.
455.15 Full investigation.
455.16 Resolution of full investigation.
455.17 Reporting requirements.
455.18 Provider’s statements on claims
forms.
455.19 Provider’s statement on check.
455.20 Recipient verification procedure.
455.21 Cooperation with State Medicaid
fraud control units.
455.23 Withholding of payments in cases of
fraud or willful misrepresentation.

Subpart B—Disclosure of Information by
Providers and Fiscal Agents
455.100 Purpose.
455.101 Definitions.
455.102 Determination of ownership or control percentages.
455.103 State plan requirement.
455.104 Disclosure by providers and fiscal
agents: Information on ownership and
control.
455.105 Disclosure by providers: Information
related to business transactions.
455.106 Disclosure by providers: Information
on persons convicted of crimes.
AUTHORITY: Sec. 1102 of the Social Security
Act (42 U.S.C. 1302).
SOURCE: 43 FR 45262, Sept. 29, 1978, unless
otherwise noted.

§ 455.1

Basis and scope.

This part sets forth requirements for
a State fraud detection and investigation program, and for disclosure of information on ownership and control.
(a) Under the authority of sections
1902(a)(4), 1903(i)(2), and 1909 of the Social Security Act, Subpart A provides
State plan requirements for the identification, investigation, and referral of
suspected fraud and abuse cases. In addition, the subpart requires that the
State—

§ 455.2 Definitions.
As used in this part unless the context indicates otherwise—
Abuse means provider practices that
are inconsistent with sound fiscal,
business, or medical practices, and result in an unnecessary cost to the Medicaid program, or in reimbursement for
services that are not medically necessary or that fail to meet professionally
recognized
standards
for
health care. It also includes recipient
practices that result in unnecessary
cost to the Medicaid program.
Conviction or Convicted means that a
judgment of conviction has been entered by a Federal, State, or local
court, regardless of whether an appeal
from that judgment is pending.
Exclusion means that items or services furnished by a specific provider
who has defrauded or abused the Medicaid program will not be reimbursed
under Medicaid.
Fraud means an intentional deception or misrepresentation made by a
person with the knowledge that the deception could result in some unauthorized benefit to himself or some other
person. It includes any act that constitutes fraud under applicable Federal
or State law.
Furnished refers to items and services
provided directly by, or under the direct supervision of, or ordered by, a
practitioner or other individual (either
as an employee or in his or her own capacity), a provider, or other supplier of
services. (For purposes of denial of reimbursement within this part, it does
not refer to services ordered by one
party but billed for and provided by or
under the supervision of another.)
Practitioner means a physician or
other individual licensed under State
law to practice his or her profession.

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Centers for Medicare & Medicaid Services, HHS
Suspension means that items or services furnished by a specified provider
who has been convicted of a programrelated offense in a Federal, State, or
local court will not be reimbursed
under Medicaid.
[48 FR 3755, Jan. 27, 1983, as amended at 50
FR 37375, Sept. 13, 1985; 51 FR 34788, Sept. 30,
1986]

§ 455.14

§ 455.16
Preliminary investigation.

If the agency receives a complaint of
Medicaid fraud or abuse from any
source or identifies any questionable
practices, it must conduct a preliminary investigation to determine whether there is sufficient basis to warrant a
full investigation.
[48 FR 3756, Jan. 27, 1983]

§ 455.3

Other applicable regulations.

Part 1002 of this title sets forth the
following:
(a) State plan requirements for excluding providers for fraud and abuse,
and suspending practitioners convicted
of program-related crimes.
(b) The limitations on FFP for services furnished by excluded providers or
suspended practitioners.
(c) The requirements and procedures
for reinstatement after exclusion or
suspension.
(d) Requirements for the establishment and operation of State Medicaid
fraud control units and the rates of
FFP for their fraud control activities.
[51 FR 34788, Sept. 30, 1986]

Subpart A—Medicaid Agency
Fraud Detection and Investigation Program
§ 455.12

State plan requirement.

A State plan must meet the requirements of §§ 455.13 through 455.23.
[52 FR 48817, Dec. 28, 1987]

§ 455.13 Methods for identification, investigation, and referral.
The Medicaid agency must have—
(a) Methods and criteria for identifying suspected fraud cases;
(b) Methods for investigating these
cases that—
(1) Do not infringe on the legal rights
of persons involved; and
(2) Afford due process of law; and
(c) Procedures, developed in cooperation with State legal authorities, for
referring suspected fraud cases to law
enforcement officials.
[43 FR 45262, Sept. 29, 1978, as amended at 48
FR 3755, Jan. 27, 1983]

§ 455.15

Full investigation.

If the findings of a preliminary investigation give the agency reason to believe that an incident of fraud or abuse
has occurred in the Medicaid program,
the agency must take the following action, as appropriate:
(a) If a provider is suspected of fraud
or abuse, the agency must—
(1) In States with a State Medicaid
fraud control unit certified under subpart C of part 1002 of this title, refer
the case to the unit under the terms of
its agreement with the unit entered
into under § 1002.309 of this title; or
(2) In States with no certified Medicaid fraud control unit, or in cases
where no referral to the State Medicaid
fraud control unit is required under
paragraph (a)(1) of this section, conduct a full investigation or refer the
case to the appropriate law enforcement agency.
(b) If there is reason to believe that a
recipient has defrauded the Medicaid
program, the agency must refer the
case to an appropriate law enforcement
agency.
(c) If there is reason to believe that a
recipient has abused the Medicaid program, the agency must conduct a full
investigation of the abuse.
[48 FR 3756, Jan. 27, 1983, as amended at 51
FR 34788, Sept. 30, 1986]

§ 455.16 Resolution of full investigation.
A full investigation must continue
until—
(a) Appropriate legal action is initiated;
(b) The case is closed or dropped because of insufficient evidence to support the allegations of fraud or abuse;
or

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§ 455.17

42 CFR Ch. IV (10–1–06 Edition)

(c) The matter is resolved between
the agency and the provider or recipient. This resolution may include but is
not limited to—
(1) Sending a warning letter to the
provider or recipient, giving notice
that continuation of the activity in
question will result in further action;
(2) Suspending or terminating the
provider from participation in the Medicaid program;
(3) Seeking recovery of payments
made to the provider; or
(4) Imposing other sanctions provided
under the State plan.
[43 FR 45262, Sept. 29, 1978, as amended at 48
FR 3756, Jan. 27, 1983]

§ 455.17

Reporting requirements.

The agency must report the following
fraud or abuse information to the appropriate Department officials at intervals prescribed in instructions.
(a) The number of complaints of
fraud and abuse made to the agency
that warrant preliminary investigation.
(b) For each case of suspected provider fraud and abuse that warrants a
full investigation—
(1) The provider’s name and number;
(2) The source of the complaint;
(3) The type of provider;
(4) The nature of the complaint;
(5) The approximate range of dollars
involved; and
(6) The legal and administrative disposition of the case, including actions
taken by law enforcement officials to
whom the case has been referred.
(Approved by the Office of Management and
Budget under control number 0938–0076)
[43 FR 45262, Sept. 29, 1978, as amended at 48
FR 3756, Jan. 27, 1983]

§ 455.18 Provider’s
claims forms.

statements

on

(a) Except as provided in § 455.19, the
agency must provide that all provider
claims forms be imprinted in boldface
type with the following statements, or
with alternate wording that is approved by the Regional CMS Administrator:
(1) ‘‘This is to certify that the foregoing information is true, accurate,
and complete.’’

(2) ‘‘I understand that payment of
this claim will be from Federal and
State funds, and that any falsification,
or concealment of a material fact, may
be prosecuted under Federal and State
laws.’’
(b) The statements may be printed
above the claimant’s signature or, if
they are printed on the reverse of the
form, a reference to the statements
must appear immediately preceding
the claimant’s signature.
§ 455.19 Provider’s statement on check.
As an alternative to the statements
required in § 455.18, the agency may
print the following wording above the
claimant’s endorsement on the reverse
of checks or warrants payable to each
provider: ‘‘I understand in endorsing or
depositing this check that payment
will be from Federal and State funds
and that any falsification, or concealment of a material fact, may be prosecuted under Federal and State laws.’’
§ 455.20 Recipient verification procedure.
(a) The agency must have a method
for verifying with recipients whether
services billed by providers were received.
(b) In States receiving Federal
matching funds for a mechanized
claims processing and information retrieval system under part 433, subpart
C, of this subchapter, the agency must
provide prompt written notice as required by § 433.116 (e) and (f).
[48 FR 3756, Jan. 27, 1983, as amended at 56
FR 8854, Mar. 1, 1991]

§ 455.21 Cooperation with State Medicaid fraud control units.
In a State with a Medicaid fraud control unit established and certified
under subpart C of this part,
(a) The agency must—
(1) Refer all cases of suspected provider fraud to the unit;
(2) If the unit determines that it may
be useful in carrying out the unit’s responsibilities, promptly comply with a
request from the unit for—
(i) Access to, and free copies of, any
records or information kept by the
agency or its contractors;
(ii) Computerized data stored by the
agency or its contractors. These data

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Centers for Medicare & Medicaid Services, HHS
must be supplied without charge and in
the form requested by the unit; and
(iii) Access to any information kept
by providers to which the agency is authorized access by section 1902(a)(27) of
the Act and § 431.107 of this subchapter.
In using this information, the unit
must protect the privacy rights of recipients; and
(3) On referral from the unit, initiate
any available administrative or judicial action to recover improper payments to a provider.
(b) The agency need not comply with
specific requirements under this subpart that are the same as the responsibilities placed on the unit under subpart D of this part.
§ 455.23 Withholding of payments in
cases of fraud or willful misrepresentation.
(a) Basis for withholding. The State
Medicaid agency may withhold Medicaid payments, in whole or in part, to
a provider upon receipt of reliable evidence that the circumstances giving
rise to the need for a withholding of
payments involve fraud or willful misrepresentation under the Medicaid program. The State Medicaid agency may
withhold payments without first notifying the provider of its intention to
withhold such payments. A provider
may request, and must be granted, administrative review where State law so
requires.
(b) Notice of withholding. The State
agency must send notice of its withholding of program payments within 5
days of taking such action. The notice
must set forth the general allegations
as to the nature of the withholding action, but need not disclose any specific
information concerning its ongoing investigation. The notice must:
(1) State that payments are being
withheld in accordance with this provision;
(2) State that the withholding is for a
temporary period, as stated in paragraph (c) of this section, and cite the
circumstances under which withholding will be terminated;
(3) Specify, when appropriate, to
which type or types of Medicaid claims
withholding is effective; and

§ 455.101

(4) Inform the provider of the right to
submit written evidence for consideration by the agency.
(c) Duration of withholding. All withholding of payment actions under this
section will be temporary and will not
continue after:
(1) The agency or the prosecuting authorities determine that there is insufficient evidence of fraud or willful misrepresentation by the provider; or
(2) Legal proceedings related to the
provider’s alleged fraud or willful misrepresentation are completed.
[52 FR 48817, Dec. 28, 1987]

Subpart B—Disclosure of Information by Providers and Fiscal
Agents
SOURCE: 44 FR 41644, July 17, 1979, unless
otherwise noted.

§ 455.100 Purpose.
This subpart implements sections
1124, 1126, 1902(a)(38), 1903(i)(2), and
1903(n) of the Social Security Act. It
sets forth State plan requirements regarding—
(a) Disclosure by providers and fiscal
agents of ownership and control information; and
(b) Disclosure of information on a
provider’s owners and other persons
convicted of criminal offenses against
Medicare, Medicaid, or the title XX
services program.
The subpart also specifies conditions
under which the Administrator will
deny Federal financial participation
for services furnished by providers or
fiscal agents who fail to comply with
the disclosure requirements.
§ 455.101 Definitions.
Agent means any person who has been
delegated the authority to obligate or
act on behalf of a provider.
Disclosing entity means a Medicaid
provider (other than an individual
practitioner or group of practitioners),
or a fiscal agent.
Other disclosing entity means any
other Medicaid disclosing entity and
any entity that does not participate in
Medicaid, but is required to disclose
certain ownership and control information because of participation in any of

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§ 455.102

42 CFR Ch. IV (10–1–06 Edition)

the programs established under title V,
XVIII, or XX of the Act. This includes:
(a) Any hospital, skilled nursing facility, home health agency, independent clinical laboratory, renal disease facility, rural health clinic, or
health maintenance organization that
participates in Medicare (title XVIII);
(b) Any Medicare intermediary or
carrier; and
(c) Any entity (other than an individual practitioner or group of practitioners) that furnishes, or arranges for
the furnishing of, health-related services for which it claims payment under
any plan or program established under
title V or title XX of the Act.
Fiscal agent means a contractor that
processes or pays vendor claims on behalf of the Medicaid agency.
Group of practitioners means two or
more health care practitioners who
practice their profession at a common
location (whether or not they share
common facilities, common supporting
staff, or common equipment).
Indirect ownership interest means an
ownership interest in an entity that
has an ownership interest in the disclosing entity. This term includes an
ownership interest in any entity that
has an indirect ownership interest in
the disclosing entity.
Managing employee means a general
manager, business manager, administrator, director, or other individual
who exercises operational or managerial control over, or who directly or indirectly conducts the day-to-day operation of an institution, organization,
or agency.
Ownership interest means the possession of equity in the capital, the stock,
or the profits of the disclosing entity.
Person with an ownership or control interest means a person or corporation
that—
(a) Has an ownership interest totaling 5 percent or more in a disclosing
entity;
(b) Has an indirect ownership interest equal to 5 percent or more in a disclosing entity;
(c) Has a combination of direct and
indirect ownership interests equal to 5
percent or more in a disclosing entity;
(d) Owns an interest of 5 percent or
more in any mortgage, deed of trust,
note, or other obligation secured by

the disclosing entity if that interest
equals at least 5 percent of the value of
the property or assets of the disclosing
entity;
(e) Is an officer or director of a disclosing entity that is organized as a
corporation; or
(f) Is a partner in a disclosing entity
that is organized as a partnership.
Significant business transaction means
any business transaction or series of
transactions that, during any one fiscal year, exceed the lesser of $25,000
and 5 percent of a provider’s total operating expenses.
Subcontractor means—
(a) An individual, agency, or organization to which a disclosing entity has
contracted or delegated some of its
management functions or responsibilities of providing medical care to its
patients; or
(b) An individual, agency, or organization with which a fiscal agent has entered into a contract, agreement, purchase order, or lease (or leases of real
property) to obtain space, supplies,
equipment, or services provided under
the Medicaid agreeement.
Supplier means an individual, agency,
or organization from which a provider
purchases goods and services used in
carrying out its responsibilities under
Medicaid (e.g., a commercial laundry, a
manufacturer of hospital beds, or a
pharmaceutical firm).
Wholly owned supplier means a supplier whose total ownership interest is
held by a provider or by a person, persons, or other entity with an ownership
or control interest in a provider.
[44 FR 41644, July 17, 1979, as amended at 51
FR 34788, Sept. 30, 1986]

§ 455.102 Determination of ownership
or control percentages.
(a) Indirect ownership interest. The
amount of indirect ownership interest
is determined by multiplying the percentages of ownership in each entity.
For example, if A owns 10 percent of
the stock in a corporation which owns
80 percent of the stock of the disclosing
entity, A’s interest equates to an 8 percent indirect ownership interest in the
disclosing entity and must be reported.
Conversely, if B owns 80 percent of the
stock of a corporation which owns 5
percent of the stock of the disclosing

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Centers for Medicare & Medicaid Services, HHS
entity, B’s interest equates to a 4 percent indirect ownership interest in the
disclosing entity and need not be reported.
(b) Person with an ownership or control
interest. In order to determine percentage of ownership, mortgage, deed of
trust, note, or other obligation, the
percentage of interest owned in the obligation is multiplied by the percentage of the disclosing entity’s assets
used to secure the obligation. For example, if A owns 10 percent of a note
secured by 60 percent of the provider’s
assets, A’s interest in the provider’s assets equates to 6 percent and must be
reported. Conversely, if B owns 40 percent of a note secured by 10 percent of
the provider’s assets, B’s interest in
the provider’s assets equates to 4 percent and need not be reported.
§ 455.103

State plan requirement.

A State plan must provide that the
requirements of §§ 455.104 through
455.106 are met.
§ 455.104 Disclosure by providers and
fiscal agents: Information on ownership and control.
(a) Information that must be disclosed.
The Medicaid agency must require
each disclosing entity to disclose the
following information in accordance
with paragraph (b) of this section:
(1) The name and address of each person with an ownership or control interest in the disclosing entity or in any
subcontractor in which the disclosing
entity has direct or indirect ownership
of 5 percent or more;
(2) Whether any of the persons
named, in compliance with paragraph
(a)(1) of this section, is related to another as spouse, parent, child, or sibling.
(3) The name of any other disclosing
entity in which a person with an ownership or control interest in the disclosing entity also has an ownership or
control interest. This requirement applies to the extent that the disclosing
entity can obtain this information by
requesting it in writing from the person. The disclosing entity must—
(i) Keep copies of all these requests
and the responses to them;

§ 455.105

(ii) Make them available to the Secretary or the Medicaid agency upon request; and
(iii) Advise the Medicaid agency
when there is no response to a request.
(b) Time and manner of disclosure. (1)
Any disclosing entity that is subject to
periodic survey and certification of its
compliance with Medicaid standards
must supply the information specified
in paragraph (a) of this section to the
State survey agency at the time it is
surveyed. The survey agency must
promptly furnish the information to
the Secretary and the Medicaid agency.
(2) Any disclosing entity that is not
subject to periodic survey and certification and has not supplied the information specified in paragraph (a) of
this section to the Secretary within
the prior 12-month period, must submit
the information to the Medicaid agency before entering into a contract or
agreement to participate in the program. The Medicaid agency must
promptly furnish the information to
the Secretary.
(3) Updated information must be furnished to the Secretary or the State
survey or Medicaid agency at intervals
between recertification or contract renewals, within 35 days of a written request.
(c) Provider agreements and fiscal agent
contracts. A Medicaid agency shall not
approve a provider agreement or a contract with a fiscal agent, and must terminate an existing agreement or contract, if the provider or fiscal agent
fails to disclose ownership or control
information as required by this section.
(d) Denial of Federal financial participation (FFP). FFP is not available in
payments made to a provider or fiscal
agent that fails to disclose ownership
or control information as required by
this section.
§ 455.105 Disclosure by providers: Information related to business transactions.
(a) Provider agreements. A Medicaid
agency must enter into an agreement
with each provider under which the
provider agrees to furnish to it or to
the Secretary on request, information

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§ 455.106

42 CFR Ch. IV (10–1–06 Edition)

related to business transactions in accordance with paragraph (b) of this section.
(b) Information that must be submitted.
A provider must submit, within 35 days
of the date on a request by the Secretary or the Medicaid agency, full and
complete information about—
(1) The ownership of any subcontractor with whom the provider has
had business transactions totaling
more than $25,000 during the 12-month
period ending on the date of the request; and
(2) Any significant business transactions between the provider and any
wholly owned supplier, or between the
provider and any subcontractor, during
the 5-year period ending on the date of
the request.
(c) Denial of Federal financial participation (FFP). (1) FFP is not available
in expenditures for services furnished
by providers who fail to comply with a
request made by the Secretary or the
Medicaid agency under paragraph (b) of
this section or under § 420.205 of this
chapter (Medicare requirements for
disclosure).
(2) FFP will be denied in expenditures for services furnished during the
period beginning on the day following
the date the information was due to
the Secretary or the Medicaid agency
and ending on the day before the date
on which the information was supplied.
§ 455.106 Disclosure by providers: Information on persons convicted of
crimes.
(a) Information that must be disclosed.
Before the Medicaid agency enters into
or renews a provider agreement, or at
any time upon written request by the
Medicaid agency, the provider must
disclose to the Medicaid agency the
identity of any person who:
(1) Has ownership or control interest
in the provider, or is an agent or managing employee of the provider; and
(2) Has been convicted of a criminal
offense related to that person’s involvement in any program under Medicare, Medicaid, or the title XX services
program since the inception of those
programs.
(b) Notification to Inspector General. (1)
The Medicaid agency must notify the
Inspector General of the Department of

any disclosures made under paragraph
(a) of this section within 20 working
days from the date it receives the information.
(2) The agency must also promptly
notify the Inspector General of the Department of any action it takes on the
provider’s application for participation
in the program.
(c) Denial or termination of provider
participation. (1) The Medicaid agency
may refuse to enter into or renew an
agreement with a provider if any person who has an ownership or control
interest in the provider, or who is an
agent or managing employee of the
provider, has been convicted of a criminal offense related to that person’s involvement in any program established
under Medicare, Medicaid or the title
XX Services Program.
(2) The Medicaid agency may refuse
to enter into or may terminate a provider agreement if it determines that
the provider did not fully and accurately make any disclosure required
under paragraph (a) of this section.

PART 456—UTILIZATION CONTROL
Subpart A—General Provisions
Sec.
456.1 Basis and purpose of part.
456.2 State plan requirements.
456.3 Statewide surveillance and utilization
control program.
456.4 Responsibility for monitoring the utilization control program.
456.5 Evaluation criteria.
456.6 Review by State medical agency of appropriateness and quality of services.

Subpart B—Utilization Control: All Medicaid
Services
456.21
456.22
456.23

Scope.
Sample basis evaluation of services.
Post-payment review process.

Subpart C—Utilization Control: Hospitals
456.50
456.51

Scope.
Definitions.
CERTIFICATION OF NEED FOR CARE

456.60 Certification and recertification of
need for inpatient care.
PLAN OF CARE
456.80

Individual written plan of care.

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