Relates to how audits of Medicaid-related records of pharmacy providers shall be conducted

* Requires that adequate prior notice be given, to responsible individuals in the pharmacy's operations that an audit has been scheduled and prohibits an audit from being scheduled during the first 5 business days of any calendar month.

* Allows for the submission of electronic records in an audit where otherwise acceptable under state and federal law.

* States that a contract auditor may not be paid based on the number of challenged or denied claims identified by the auditor or the amount found to be owed.

* Sets standards for auditors and audits and requires that any audit involving the review of clinical or professional judgment shall be conducted by or in consultation with the State Board of Pharmacy.

* Limits the retroactive coverage of Medicaid audits to a one-year period.

* States that clerical and record-keeping errors may not be deemed to be willful violations of the Medicaid law or subject to criminal penalties without proof of a willful intent to commit fraud.

* Limits the use of extrapolation to determine overpayment amounts and requires that extrapolation meet certain standards when utilized.

* Permits an audited pharmacy 10 days to provide documentation to address any discrepancy found by the auditor and establishes a schedule for preliminary audit reports and final audit reports to be sent to the responsible individuals in the pharmacy's operations.

* Allows pharmacies to use the records or orders of prescribing physicians, hospitals or other prescribers as acceptable means to validate a pharmacy record of a prescription.

* Provides a procedure for an administrative appeal by an audited pharmacy, to be established by regulation.

* Establishes acceptable procedures for state recoupment or collection of Medicaid overpayments to the audited pharmacy.

§ 2- Effective date.

Justification

In recent months, pharmacies have been the subject of intense Medicaid audits by the office of the Medicaid Inspector General (OMIG) and contingency-based auditing firms at the state and county levels for administrative or clerical errors which through the use of extrapolation have resulted in exorbitant fines and payment recoupments per individual audit.

While the OMIG's efforts to identify and punish real Medicaid provider fraud and abuse are very important, pharmacies are being targeted by the OMIG for clerical mistakes, errors or misinterpretations that in no way constitute fraud and abuse. This legislation provides limitations on the OMIG when auditing pharmacies to ensure that its actions are consistent with the real intent of the 2006 law creating the OMIG and its duties prosecuting providers who are defrauding the program with willful intent and negatively impacting patient health and safety.

This legislation establishes limitations on OMIG auditing activities of pharmacy providers by prohibiting the use of extrapolation for clerical mistakes or errors and setting auditing procedures and standards to restore fairness and integrity in the OMIG auditing process.

Legislative history

S.8258/A10333 of 2008

Fiscal implications

None.

Effective date

This act shall take effect on the one hundred twentieth day after it shall have become a law; provided, however, that effective immediately, the addition, amendment and/or repeal of any rule of regulation necessary for the implementation of this act on its effective date are authorized and directed to be made and completed on or before such effective date.