S T A T E O F N E W Y O R K
________________________________________________________________________
7448
2009-2010 Regular Sessions
I N A S S E M B L Y
April 6, 2009
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Introduced by M. of A. SCHIMMINGER, BENEDETTO, COLTON, DelMONTE, FIELDS,
GABRYSZAK, HEASTIE, JAFFEE, JOHN, SCHROEDER -- Multi-Sponsored by --
M. of A. CANESTRARI, CHRISTENSEN, GREENE, GUNTHER, HAWLEY, KOON,
MAGEE, MAISEL, PHEFFER, REILLY -- read once and referred to the
Committee on Health
AN ACT to amend the public health law, in relation to audits of Medicaid
pharmacy providers
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. The public health law is amended by adding a new section
32-a to read as follows:
S 32-A. AUDITING STANDARDS. NOTWITHSTANDING ANY OTHER PROVISION OF
LAW, AN AUDIT OF THE MEDICAID-RELATED RECORDS OF A PHARMACY PROVIDER
SHALL BE CONDUCTED AS FOLLOWS:
1. THE DEPARTMENT, THE OFFICE, OR ANY CONTRACT AUDITOR CONDUCTING AN
AUDIT OF A PHARMACY PROVIDER'S MEDICAID OPERATIONS ON BEHALF OF THE
DEPARTMENT SHALL PROVIDE APPROPRIATE INDIVIDUALS IN THE CENTRAL OFFICES
OF THE PROVIDER'S OPERATIONS WITH NOTICE AT LEAST SEVEN BUSINESS DAYS
PRIOR TO AN ON-SITE AUDIT. AN AUDIT MAY NOT BE SCHEDULED DURING THE
FIRST FIVE BUSINESS DAYS OF ANY CALENDAR MONTH.
2. THE DEPARTMENT, THE OFFICE, OR A CONTRACT AUDITOR SHALL ACCEPT
ELECTRONIC RECORDS FOR AUDITING UNDER THE SAME TERMS AND CONDITIONS AND
FOR THE SAME PURPOSES AS THE PAPER ANALOGS OF SUCH RECORDS, TO THE
EXTENT SUCH RECORDS ARE OTHERWISE ACCEPTABLE AND LEGAL UNDER STATE AND
FEDERAL PHARMACY, FOOD AND DRUG, AND MEDICAID LAWS. POINT OF SALE ELEC-
TRONIC REGISTER DATA MAY QUALIFY AS PROOF OF DELIVERY TO THE MEDICAID
RECIPIENT, AND ELECTRONIC BENEFICIARY SIGNATURE LOGS, ELECTRONIC TRACK-
ING OF PRESCRIPTIONS, ELECTRONIC PRESCRIBER PRESCRIPTION TRANSMISSIONS,
AND IMAGERY OF HARD COPY PRESCRIPTIONS SHALL BE ACCEPTABLE.
3. IF AN AUDIT IS TO BE CONDUCTED BY A CONTRACT AUDITOR, THE CONTRACT
AUDITOR'S PAYMENT FOR THE AUDIT MAY NOT BE BASED ON THE NUMBER OF CHAL-
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD02131-04-9
A. 7448 2
LENGED OR DENIED CLAIMS IDENTIFIED BY THE CONTRACT AUDITOR OR THE AMOUNT
ALLEGED BY THE AUDITOR TO BE OWED.
4. EACH MEDICAID PHARMACY AUDIT SHALL BE CONDUCTED BY A FIELD AGENT
WHO POSSESSES THE REQUISITE EXPERTISE IN THE RELEVANT PROVIDER PRACTICE.
THE AUDITOR SHALL CONDUCT THE AUDIT:
(A) IN ACCORDANCE WITH GENERALLY ACCEPTED:
I. ACCOUNTING PRINCIPLES, STANDARDS, AND PROCEDURES; AND
II. AUDITING PRINCIPLES, STANDARDS, AND PROCEDURES; AND
(B) USING STANDARDS AND PARAMETERS ESTABLISHED BY FINAL REGULATION
THAT ARE IDENTICAL FOR ALL AUDITS CONDUCTED.
5. ANY AUDIT INVOLVING THE REVIEW OF CLINICAL OR PROFESSIONAL JUDGMENT
SHALL BE CONDUCTED BY OR IN CONSULTATION WITH THE STATE BOARD OF PHARMA-
CY.
6. THE PERIOD COVERED BY AN AUDIT MAY NOT EXCEED ONE YEAR FROM THE
DATE THE EARLIEST CLAIM WAS SUBMITTED TO THE DEPARTMENT FOR ADJUDI-
CATION.
7. EACH PHARMACY PROVIDER SHALL BE AUDITED ACCORDING TO THE SAME STAN-
DARDS, PARAMETERS, AND PROCEDURES AS OTHER SIMILAR AND SIMILARLY SITU-
ATED PHARMACY PROVIDERS AUDITED BY THE DEPARTMENT, THE OFFICE, OR THE
CONTRACT AUDITOR.
8. A CLERICAL OR RECORD-KEEPING ERROR SUCH AS A TYPOGRAPHICAL ERROR, A
SCRIVENER'S ERROR, OR A COMPUTER ERROR IN A REQUIRED DOCUMENT OR RECORD
SUBMITTED IN AN AUDIT MAY NOT BE DEEMED BY THE DEPARTMENT, THE OFFICE,
OR THE CONTRACT AUDITOR TO CONSTITUTE A WILLFUL VIOLATION OF THE STATE
MEDICAID LAW, AND MAY NOT BE SUBJECT TO CRIMINAL PENALTIES WITHOUT PROOF
OF A WILLFUL INTENT TO COMMIT FRAUD.
9. A FINDING OF AN OVERPAYMENT OR UNDERPAYMENT MAY BE DETERMINED USING
PROBABILITY SAMPLING OR EXTRAPOLATION BASED ON THE NUMBER OF PATIENTS
SERVED HAVING A SIMILAR DIAGNOSIS, OR ON THE NUMBER OF SIMILAR ORDERS OR
REFILLS OF SIMILAR DRUGS.
10. THE DEPARTMENT, THE OFFICE, OR A CONTRACT AUDITOR CONDUCTING AN
AUDIT OF A MEDICAID PHARMACY MAY NOT USE PROBABILITY SAMPLING OR EXTRAP-
OLATION TO DETERMINE OVERPAYMENT AMOUNTS DUE TO BE RECOVERED BY RECOUP-
MENT, OFFSET, OR OTHERWISE FROM THE PHARMACY UNLESS THE DEPARTMENT AND
THE AUDITING ENTITY DETERMINE THAT:
(A) THERE IS A PATTERN OF A HIGH LEVEL OF PAYMENT ERROR SUSTAINED BY
THAT SPECIFIC PHARMACY PROVIDER THROUGHOUT THE AUDITED PERIOD;
(B) IF THE OVERPAYMENTS ARE THE RESULT OF CLERICAL OR RECORD-KEEPING
ERRORS, THEY ARE WILLFUL;
(C) DOCUMENTED EDUCATIONAL INTERVENTION HAS FAILED TO CORRECT THAT
SUSTAINED HIGH LEVEL OF PAYMENT ERROR;
(D) THE EXTRAPOLATION IS MADE FROM A STATISTICALLY VALID SAMPLE OF
CLAIMS;
(E) THE LEVEL OF CONFIDENCE FROM EXTRAPOLATION IS PROJECTED BY AN
INDEPENDENT STATISTICIAN NOT EMPLOYED BY OR CONNECTED TO THE AUDITING
ENTITY TO BE NINETY-FIVE PERCENT OR GREATER; AND
(F) THE SAMPLE SIZE OF THE CLAIMS REVIEWED IS AT LEAST TEN PERCENT OF
THE TOTAL CLAIMS FOR WHICH OVERPAYMENTS DUE ARE BEING EXTRAPOLATED.
11. AN EXTRAPOLATION MAY NOT BE BASED ON THE PRACTICE PATTERNS OF ANY
PHARMACY PROVIDER OTHER THAN THE INDIVIDUAL PROVIDER BEING AUDITED.
12. ANY PROBABILITY SAMPLING AND EXTRAPOLATION PERFORMED BY THE
DEPARTMENT, THE OFFICE, OR A CONTRACT AUDITOR IN THE COURSE OF AN AUDIT
SHALL BE PERFORMED IN CONFORMITY WITH GENERALLY ACCEPTED STATISTICAL
STANDARDS AND PROCEDURES, WHICH SHALL BE MADE AVAILABLE, UPON REQUEST,
TO THE AUDITED PHARMACY.
A. 7448 3
13. AN AUDITED PHARMACY SHALL BE ALLOWED AT LEAST TEN BUSINESS DAYS TO
PRODUCE DOCUMENTATION TO ADDRESS THE AUDITING ENTITY'S QUESTIONS ABOUT A
DOCUMENT OR RECORD PRODUCED IN AN AUDIT.
14. A PHARMACY MAY USE THE RECORDS OR ORDER OF A PRESCRIBING PHYSI-
CIAN, HOSPITAL, OR OTHER AUTHORIZED PRESCRIBER OF DRUGS OR SUPPLIES,
WRITTEN OR TRANSMITTED BY ANY LEGAL AND ACCEPTABLE MEANS OF COMMUNI-
CATION, TO VALIDATE A PHARMACY RECORD OF A PRESCRIPTION DRUG ORDER OR
REFILL OF A LEGEND OR NARCOTIC DRUG.
15. THE DEPARTMENT, THE OFFICE, OR THE CONTRACT AUDITOR SHALL DELIVER
TO RESPONSIBLE INDIVIDUALS IN THE CENTRAL OFFICES OF THE OPERATIONS OF
THE AUDITED PHARMACY:
(A) A PRELIMINARY AUDIT REPORT, WITHIN NINETY CALENDAR DAYS AFTER THE
CONCLUSION OF THE AUDIT.
(B) A FINAL AUDIT REPORT, WITHIN ONE HUNDRED EIGHTY CALENDAR DAYS
AFTER THE LATER OF RECEIPT OF THE AUDIT REPORT BY THE PHARMACY OR THE
ISSUANCE OF ANY FINAL DECISION IN AN ADMINISTRATIVE APPEAL OF THE
PRELIMINARY AUDIT REPORT.
16. ABSENT FRAUD OR ABUSE BY THE AUDITED PHARMACY PROVIDER, THE
DEPARTMENT OR THE OFFICE MAY NOT RECOUP ANY PART OF A CLAIM THAT WAS, IN
WHOLE OR PART, PREVIOUSLY ADJUDICATED AS FULLY PAYABLE.
17. WHENEVER A FINAL DETERMINATION IS MADE THAT A RECOVERY FROM AN
AUDITED PHARMACY PROVIDER IS WARRANTED, THE FUNDS MAY BE RECOVERED ONLY
THROUGH THE FOLLOWING METHODS:
(A) THE DEPARTMENT OR THE OFFICE MAY RECOVER FUNDS BY CHECK IF THE
PHARMACY PROVIDER IS NOTIFIED ON THE WRITTEN NOTIFICATION OF THE FINAL
AUDIT DETERMINATION OF:
(I) ANY NECESSARY PAYEE INFORMATION;
(II) CLAIM DETAILS, INCLUDING THE AMOUNTS OF EACH CONFIRMED OVERPAID
OR MISPAID CLAIM; AND
(III) TOTAL AMOUNT DUE.
(B) THE DEPARTMENT, THE OFFICE, OR A CONTRACT AUDITOR MAY RECOVER FROM
A PHARMACY PROVIDER THROUGH ELECTRONIC REMITTANCE IN THE FEDERALLY-AP-
PROVED FORMAT THAT IS IN PLACE AT THE TIME OF THE FUNDS RECOVERY, IF
CLAIMS ARE DETAILED WITH THE APPROPRIATE NATIONAL COUNCIL OF
PRESCRIPTION DRUG PROGRAMS ADJUSTMENT CODE INDICATING AUDIT. EACH CLAIM
LEVEL ELECTRONIC REMITTANCE RECOVERY SHALL INCLUDE THE PROVIDER'S IDEN-
TIFICATION NUMBER, THE PRESCRIPTION NUMBER FOR THE RECOVERED CLAIM, THE
DATE OF SERVICE OF THE CLAIM TRANSACTION, AND THE RECOVERY AMOUNT FOR
SUCH CLAIM.
18. THIS SECTION DOES NOT APPLY TO ANY INVESTIGATIVE AUDIT CONDUCTED
BY THE DEPARTMENT, THE OFFICE, OR A CONTRACT AUDITOR WHEN THE DEPARTMENT
HAS REASONABLE AND RELIABLE EVIDENCE THAT A CLAIM SUBMITTED TO THE
DEPARTMENT FOR PAYMENT WAS SUBMITTED WITH A KNOWING AND WILLFUL INTENT
TO DEFRAUD THE DEPARTMENT OR OTHERWISE KNOWINGLY AND WILLFULLY MISREPRE-
SENT THE CLAIM.
19. THE AUDIT CRITERIA SET FORTH IN THIS SECTION SHALL APPLY ONLY TO
AUDITS OF CLAIMS SUBMITTED FOR PAYMENT AFTER THE EFFECTIVE DATE OF THIS
SECTION.
20. WITHIN ONE HUNDRED TEN DAYS OF THE EFFECTIVE DATE OF THIS SECTION,
THE DEPARTMENT AND THE OFFICE SHALL ESTABLISH BY FINAL REGULATION A
PROCESS UNDER WHICH AN AUDITED PHARMACY PROVIDER MAY FILE AN ADMINISTRA-
TIVE APPEAL WITH THE DEPARTMENT IF THE PROVIDER IS UNABLE TO RESOLVE A
PRELIMINARY AUDIT DETERMINATION SATISFACTORILY. IF AN ADMINISTRATIVE
APPEAL IS REQUESTED, THE AUDITED PHARMACY PROVIDER MAY NOT BE REQUIRED
TO OBTAIN FORMAL REPRESENTATION BY LEGAL COUNSEL.
A. 7448 4
21. AN ADMINISTRATIVE APPEAL SHALL BE CONDUCTED BY THE DEPARTMENT OR
BY AN AD HOC PEER-REVIEW PANEL APPOINTED BY THE DEPARTMENT WHICH
CONSISTS OF AT LEAST THREE PHARMACY PROVIDERS LICENSED IN THE STATE WHO
ARE ACTIVELY ENGAGED IN THE PRACTICE OF PHARMACY IN THE STATE AND MUTU-
ALLY AGREEABLE TO THE AUDITED PHARMACY AND THE DEPARTMENT.
22. IF, FOLLOWING AN ADMINISTRATIVE APPEAL, THE DEPARTMENT OR THE
REVIEW PANEL FIND THAT AN UNFAVORABLE AUDIT REPORT IS UNSUBSTANTIATED,
THE DEPARTMENT SHALL ISSUE A FINAL DISMISSAL OF THE FINDINGS OF THE
AUDIT REPORT WITH PREJUDICE, WITHOUT THE NEED FOR FURTHER PROCEEDINGS OR
PENALTY TO THE AUDITED PHARMACY.
23. THE AUDIT CRITERIA SET FORTH IN THIS SECTION SHALL APPLY ONLY TO
AUDITS OF CLAIMS SUBMITTED FOR PAYMENT AFTER THE EFFECTIVE DATE OF THIS
SECTION.
24. (A) ONLY THOSE INDIVIDUALS OR ENTITIES WHO HAVE BEEN EXCLUDED FROM
PARTICIPATION AS PROVIDERS IN THE MEDICAL ASSISTANCE PROGRAM AND WHO
HAVE BEEN AFFORDED PROPER AND ADEQUATE NOTICE AND AN OPPORTUNITY FOR A
HEARING PURSUANT TO STATE AND FEDERAL REGULATIONS SHALL HAVE THEIR NAMES
AND OTHER IDENTIFYING INFORMATION PUBLISHED AND OTHERWISE MADE AVAILABLE
TO THE PUBLIC FOR THE PURPOSE OF IDENTIFYING SUCH INDIVIDUAL OR ENTITY.
(B) THE STATE MEDICAL ASSISTANCE AUDIT AGENCY SHALL NOT PUBLISH IDEN-
TIFYING INFORMATION OF ANY PROVIDER IN THE MEDICAL ASSISTANCE PROGRAM
WHO HAS BEEN THE SUBJECT OF AN AUDIT BY THE AGENCY UNTIL TWENTY DAYS
AFTER ISSUANCE OF A FINAL WRITTEN REPORT BY THE AGENCY PROVIDED FURTHER
THAT NO ADMINISTRATIVE HEARING OR PROCEEDING FOR JUDICIAL REVIEW IS
PENDING AND THE TIME FOR INITIATING AN ADMINISTRATIVE HEARING OR JUDI-
CIAL REVIEW HAS EXPIRED.
25. WHERE AUDIT FINDINGS BY THE STATE MEDICAL ASSISTANCE AUDIT AGENCY
SEEKING RECOVERIES FROM A PHARMACY ARE BASED ON A MISSING PRESCRIPTION
OR FISCAL ORDER REQUIRED TO SUPPORT A CLAIM FOR REIMBURSEMENT OR IS
BASED ON AN ACCEPTANCE BY A PHARMACY OF A PRESCRIPTION OR FISCAL ORDER
WHICH WAS NOT PROPERLY COMPLETED PURSUANT TO STATE LAW AND REGULATIONS,
THE PHARMACY SHALL HAVE THE RIGHT TO SUBMIT COLLATERAL DOCUMENTATION TO
DEMONSTRATE THE VALIDITY OF THE PRESCRIPTION OR FISCAL ORDER AND ITS
RIGHT TO REIMBURSEMENT UNDER THE MEDICAL ASSISTANCE PROGRAM. THE AGENCY
AND ANY OTHER REVIEWING ENTITY SHALL REVIEW SUCH DOCUMENTATION IN GOOD
FAITH AND MAKE AN APPROPRIATE DETERMINATION.
26. WHERE A PROVIDER MAKES A GOOD FAITH EFFORT TO OBTAIN THE IDENTITY
OF THE INDIVIDUAL OR ENTITY WHICH ORDERS MEDICAL SERVICES OR SUPPLIES
FOR WHICH REIMBURSEMENT IS CLAIMED UNDER THE MEDICAL ASSISTANCE PROGRAM,
NO AUDIT FINDING BY THE STATE AUDIT AGENCY SEEKING ANY RECOVERY OF
MEDICAL ASSISTANCE REIMBURSEMENT SHALL BE MADE WHERE THE PROVIDER CAUSES
TO BE MADE AN ERRONEOUS IDENTIFICATION OF THE ORDERER OF SUCH SERVICES
OR SUPPLIES ON ANY CLAIM SUBMITTED TO THE PROGRAM.
S 2. This act act shall take effect on the one hundred twentieth day
after it shall have become a law. Effective immediately, the addition,
amendment and/or repeal of any rule or regulation necessary for the
implementation of this act on its effective date is authorized and
directed to be made and completed on or before such effective date.