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April 10, 2024

Government Relations 101: What's a Material Violation of Medicaid Rules and Regulations?

This blog is the eighth in a series about interacting with government regulators and is intended to help our clients understand and manage contact and outreach from government regulators, law enforcement, or both.

The Setup

As noted in the last blog in this series, this blog explores what government regulators consider a material violation of Medicaid program rules and regulations. That determination, among others, significantly impacts where regulators focus their efforts and whether you, as an enrolled Medicaid provider, face an increased risk of audit or criminal investigation.

Separate and apart from the considerations outlined in the paragraphs that follow, recent revisions to OMIG compliance requirements make it clear that providers are required to identify, explain, and return any overpayments, whether material or not, regardless of size and even if the underlying claim has been reversed.1 There is, however, a distinction between reporting and returning overpayments and the types of billing errors that can subject a provider to enhanced scrutiny and criminal liability above and beyond the need to correct an overpayment. Those considerations are discussed below and are well illustrated by Cuomo v. Ferran.2

The Law

Between May 2002 and February 2005, Osmin Ferran served as a “runner” for a health care provider that operated mobile dental vans. His job was to steer patients to the dental vans for treatment. Ferran, however, had previously been convicted of fraud during his years as a runner and was an excluded provider. Excluded providers are prohibited from having any involvement with the Medicaid program, which leads to the submission of claims for reimbursement.3 The NYS Attorney General’s Office (OAG) brought a lawsuit to recover Medicaid funds obtained as a consequence of Ferran’s referrals as well as those of other runners.4 In upholding a ruling that OAG was entitled to the repayment of $11 million, the Appellate Division, Second Department opined, in essence, that all conditions of participation within the Medicaid program are equally conditions of payment.5 Put otherwise, the provider’s employment of an excluded provider (Ferran) was sufficient to render all of its claims for reimbursement invalid. From the state’s perspective, if the Medicaid program has a requirement, meeting that requirement (and all other attendant requirements) is a prerequisite to receiving payment. Among other reasons, this case illustrates the need for all providers to have robust compliance programs.6 In reaching this conclusion, the court cited a variety of state regulations regarding the Medicaid program.7


While the language of Cuomo v. Ferran could lead a provider to reasonably conclude that any violation of any Medicaid rule is material and will subject a provider to civil or criminal prosecution, the reality is more nuanced. On what violations regulators focus their efforts depends on a host of factors, including agency priorities and even the particular interests of the government regulator in question. Broadly speaking, violations that are both symptomatic of fraud and systematic (i.e., ones that evince a pattern of deceit) are more likely to subject a provider to criminal scrutiny than those that do not. Think of repeatedly filing claims for services never rendered.

Similarly, any breach of a fundamental precept of the Medicaid program, such as, for instance, paying kickbacks, employing an excluded provider (as occurred in Cuomo v. Ferran), or filing false or deceptive ownership documents, are more likely to subject a provider to criminal scrutiny than those that do not. Finally, conduct that intentionally and impermissibly augments a provider’s reimbursement—either through diversion, upcoding, impermissible unbundling, or other billing schemes—will more likely subject a provider to criminal scrutiny than conduct that does not.

These considerations are by no means exhaustive but rather illustrate patterns of conduct that are indicative of an intent to defraud and, therefore, are seen as a fundamental threat to the financial integrity of the Medicaid program. These violations are generally considered material under both state and federal law and will likely subject a provider to criminal prosecution, civil liability under the state or federal False Claims Act, or both.8 It is best to avoid these patterns of conduct and consult with an attorney to the extent you have questions or concerns about whether you are engaged in this conduct. Barclay Damon has several attorneys experienced in defending providers against government allegations of civil, criminal, and administrative misconduct.

In the next blog in this series, we will explore the considerations that underlie the government’s decision to treat a material violation of Medicaid program rules as a criminal wrong versus a civil wrong.

If you have any questions regarding the content of this blog, please contact Chris Shaw, partner, at, or another member of the firm’s Health Care Controversies or Health & Human Services Providers Teams or White Collar & Government Investigations Practice Area.

1Further to 18 NYCRR 518.5(c), New York State may initiate proceedings to recover any overpayment. “An overpayment includes any amount not authorized to be paid under the medical assistance program . . . .” 18 NYCRR 518.1(c).
277 AD3d 698, 701.
3More specifically, “A person who is excluded from the program cannot be involved in any activity relating to furnishing medical care, services or supplies to recipients of medical assistance for which claims are submitted to the program, or relating to claiming or receiving payment for medical care, services or supplies during the period.” 18 NYCRR 515.5(c).
4Ferran was also criminally prosecuted and ultimately convicted.
5Cuomo v. Ferran, 77 AD3d 698, 701 (2010); see 18 NYCRR 515.5(3): “Providers reimbursed on a fee-for-services basis may not submit any claim and cannot be reimbursed for any medical care, services or supplies furnished by any person who is excluded from the program or which are furnished in violation of any condition of participation in the program.”
6Attorneys on Barclay Damon’s Health & Human Services Providers Team routinely assist providers in creating or revising their compliance programs.
7See 18 NYCRR §§ 515.2, 515.5, 518.1, and 518.5. 
8State Finance Law Article 13 §§ 187–194.


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