Title: Section 504.11 - Financial security.
504.11 Financial security. (a) General. (1) Purpose. The furnishing of financial security will indemnify the department against overpayments which may be made to the provider.
(2) This section applies only to providers of ordered services or supplies and applicants for enrollment as providers of such services or supplies. For the purposes of this section, ordered services or supplies are:
(i) pharmacy services and supplies;
(ii) durable medical equipment;
(iii) clinical laboratory services;
(iv) nonemergency transportation.
(3) The department may require a provider to provide financial security to the department if the department has estimated that the total claims for payment for ordered services or supplies to be submitted to the department by that provider exceed either $500,000 per year or $42,000 in any month. The computation of these estimates must exclude the amount, if any, of the estimate of the provider's claims for payment for services that are not ordered services. When the department has determined that a provider must furnish financial security, that provider must provide such security as a condition of the provider's participation or continued participation in the medical assistance program.
(b) Exemptions. The department will not require a provider established under the authority of Article 28 of the Public Health Law to supply financial security.
(c) Form of financial security. (1) Financial security may take the following forms:
(i) a bond;
(ii) an irrevocable letter of credit;
(iii) a certificate of deposit inclusive of any interest earned thereon; or
(iv) a combination of the above.
(2) Financial security must be issued by an issuing entity. An issuing entity is:
(i) a corporate surety authorized to do business in this State where the financial security to be supplied is in the form of a bond;
(ii) a bank, trust company, savings bank or savings and loan association which is:
(a) chartered by either this State or the United States of America; and
(b) authorized to do business in this State; and
(c) insured by either the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation where the financial security to be supplied is in the form of a letter of credit or certificate of deposit.
(3) The bond, letter of credit or certificate of deposit must be payable to the State of New York.
(d) Means of estimation. Providers determined to be solvent, stable, and fiscally responsible will not be required to provide financial security. in determining whether to require a provider to supply financial security, and in determining whether such security should be increased or decreased, the department will consider the following:
(1) whether the provider is solvent as shown by a review of certified financial statements, credit checks, other sources of income or other indicia of financial status;
(2) the stability of the provider as shown by the length of time the provider has been in business and the length of time the provider has been enrolled in the medical assistance program; and
(3) the fiscal responsibility of the provider as shown by the results of any prior audits or investigations of the provider by the department, a health insurance program or another government agency.
(e) Amount of financial security. (1) If financial security is required by the department, it must be in the amount of a provider's estimated claims for payment for the year for ordered services as determined by the department in accordance with the provisions of this section. In determining the estimated claims for payment for the year, the department may consider:
(i) the provider's actual billings during the previous year;
(ii) the billings of providers of similar services, taking into consideration the comparative sizes of the businesses of such other providers;
(iii) the location of the provider; and
(iv) the provider's estimate of yearly billings.
(2) A provider may request a decrease in the amount of financial security required if its actual claims for payment for ordered services are 10 percent or more below the estimated claims for payment. A provider may request such a decrease at the end of the first six months after initially providing financial security and every six months thereafter. If a provider's actual claims for payment for ordered services are below the estimated amount by more than 10 percent, the department may reduce the amount of security. The department must make its determination on the basis of at least six consecutive months of submitted claims.
(3) The department may assess a provider's billings as often as the department deems appropriate to determine whether the amount of financial security should be increased. If a provider's actual claims for payment for ordered services exceeds the amount of estimated claims for payment for ordered services by more than 10 percent, the department may require that the amount of security be increased. The department will make its determination on the basis of at least six consecutive months of submitted claims. The department will notify the provider in writing that the provider must increase the amount of financial security. such notice will set forth the basis for the department's conclusion that the amount of security shall be increased. A provider's enrollment in the medical assistance program may be terminated upon the failure to increase the amount of such security within 90 days of the date of the department's request to increase the amount of such security.
(4) A provider which was not previously required to supply financial security because its estimated claims were less than $500,000 per year or $42,000 per month may later be required to supply such security if that provider's actual claims exceed either such amount. The department may require such security if the provider submits at least $42,000 in claims for payment during any given month or if the provider submits claims for payment amounting to at least $500,000 during any one-year period. The department will notify the provider in writing of the requirement that the provider supply financial security. A provider's enrollment in the medical assistance program may be terminated upon the failure to supply such security within 90 days of the date of the department's request to supply such security.
(5) A provider which was previously required to supply financial security may request to be relieved of the obligation to continue to supply such security on the basis that the provider has not submitted billings of $500,000 in a year or $42,000 during any given month. In determining whether a provider should be relieved of the obligation to supply financial security, the department will consider the provider's billings for the 12 month period beginning with the first full month after the provider supplied the financial security.
(f) Effect of not supplying financial security. A provider's enrollment in the medical assistance program will be terminated upon the failure to supply or to increase the amount of financial security within 90 days of the date of the department's request to supply or increase the amount of such security. A provider's enrollment will not be terminated if the provider can demonstrate in writing within 90 days of the department's request that the failure to supply or increase such security is solely attributable to delays on the part of the issuing entity. Except as provided in paragraph (g) (1) of this section, if any financial security supplied pursuant to this section is canceled, revoked, allowed to expire or otherwise terminated or changed by the issuing entity, the participation of the provider in the medical assistance program will be immediately terminated. The department will send the provider a notice confirming any such termination.
(g) Financial security agreements. (1) Any bond, letter of credit or certificate of deposit supplied pursuant to this section may not by its terms be canceled, revoked, modified or allowed to expire or be otherwise terminated without at least 45 days prior written notice to the department and the express written consent of the department. The department will grant consent only when it has previously approved a request made pursuant to either paragraph (e) (2) or paragraph (e) (5) of this section. However, the consent of the department is not required before a financial security agreement is terminated or changed by the issuing entity by reason of non-payment of a premium or other default by the provider or when the amount of security is increased pursuant to paragraph (e) (3) of this section. The agreement between the provider and the issuing entity concerning the financial security of the provider must contain a provision which requires the issuing entity to provide written notification to the department 45 days in advance of any proposed cancellation, revocation, modification, expiration or other termination or change, including instances where the agreement is terminated or otherwise affected by a default by the provider.
(2) The department may demand that the issuing entity pay to the department the proceeds of the financial security only when the department has determined as a result of an audit report issued pursuant to Part 517 of this Title or a notice issued pursuant to Part 515 of this Title, that a provider was overpaid for services claimed to have been provided to one or more recipients of medical assistance and the provider has not complied with a request from the department for repayment of such overpayments, plus interest if any.
VOLUME C (Title 18)