medical-563427_1280Governor Cuomo announced that New York recovered a record-breaking $851 for the Medicaid program in 2013, which led the nation.[1]  Lately, Medicaid providers have been receiving audit letters suggesting that collections will pick up again. New York’s chief Medicaid collection agent is the Office of the Medicaid Inspector General (“OMIG”), and this agency brandishes its auditing power like the Holy Lance of Longinus.  I had the privilege and good fortune to win a reversal of a $2.1 million OMIG audit finding against a client following a hearing in recent years,[2] but such results are not common.  New York has amassed considerable resources to combat fraud, waste, and abuse in the Medicaid program, and as a result a provider facing audit may feel like the Spartans at Thermopylae.

Medicaid providers who want to keep their money need to understand the OMIG audit process, and they need to work with counsel familiar with that process.  Three mistakes most Providers make when faced with an OMIG audit include:

  1. They begin communicating with auditors themselves, thinking that getting an attorney involved will annoy or anger the auditors. Providers who make this mistake often make admissions to auditors that will plague them in all future proceedings.  Having an attorney take over the communications at the beginning reduces the chance a provider will make harmful admissions, and it offers the opportunity to identify potential trouble areas early.
  1. They fail to ask for the auditors’ sampling plan at the beginning. Early disclosure offers a provider the opportunity to attack the overpayment extrapolation that can significantly increase what a provider will have to pay back.  Litigation attacking extrapolated audit findings is most effective when the provider can show that OMIG’s sampling plan is flawed.
  1. They fail to preserve the audit record. An attorney can create an audit record that will facilitate litigation later.   Too many times, providers fail to document records that they turn over to auditors, and they fail to preserve communications.  These failures make it difficult later to attack audit findings that erroneously claim a provider failed to cooperate or to provide records.  Any failure to provide records or cooperate results in audit findings demanding a refund of all reimbursements for the services at issue.

OMIG audits are governed by 18 NYCRR §§ 517.1 et. seq., and they often begin with a letter notification.  Providers should retain counsel as soon as they receive this initial notification.  Auditors introduce themselves in an entrance interview and outline the scope of the audit.

An audit usually focuses on 100 to 200 identified records.  These records are called the “sampling frame,” and the auditors will later extrapolate the error rate found in the sampling frame to calculate the total overpayment they will demand back from the provider. Following a Draft Audit Report detailing any overpayment findings,[3] the provider may submit written objections.  The audit concludes with a Final Audit Report,[4] detailing final overpayment findings.

OMIG calculates overpayments utilizing a statistical method called a mean per unit point estimate.  This method produces stratified findings expressed in confidence levels.  A typical report could express its finding that the mean per unit point estimate of the amount overpaid is $2,200,000.  The lower strata in the findings is called the lower confidence limit, which in this example could be $1,975,000.  OMIG’s report will say it is 95% certain that the actual amount of the overpayment is greater than the lower confidence limit.

Armed with this hi-low range, OMIG offers to settle for the lower confidence limit.  However, if the provider chooses to exercise its right to a hearing challenging OMIG’s findings,[5] then OMIG will seek to prove at the hearing that the mean per unit point estimate, the higher number, is the actual overpayment amount.

In audits with smaller overpayment findings, the incentive to settle is much stronger.  For example, I once had a client whose mean per unit point estimate was approximately $400,000, and the lower confidence limit was approximately $200,000.  This provider settled because if it challenged findings at a hearing and lost, it risked doubling its liability.

18 NYCRR § 519.1 et seq. govern the hearings challenging OMIG audits.  Hearsay is admissible, and OMIG’s own records are essentially self-authenticating.[6]  The provider bears the burden of proof to show that OMIG’s audit findings are wrong.[7]  This framework makes an OMIG hearing resemble a star chamber, and hearing success for the provider often relies upon avoiding the mistakes outlined above during the audit.  Counsel can help providers avoid making the three big mistakes outlined above, and those who go it alone in an audit often do so at their peril.


[3] 18 NYCRR § 517.5
[4] 18 NYCRR § 517.6
[5] 18 NYCRR § 519.4
[6] See, e.g. 18 NYCRR §519.18(e) and (f)
[7] 18 NYCRR § 519.18