[Code of Federal Regulations]

[Title 42, Volume 4]

[Revised as of October 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 42CFR457.204]



[Page 385]

 

                         TITLE 42--PUBLIC HEALTH

 

  CHAPTER IV--CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF 

                  HEALTH AND HUMAN SERVICES (CONTINUED)

 

PART 457_ALLOTMENTS AND GRANTS TO STATES--Table of Contents

 

  Subpart B_General Administration_Reviews and Audits; Withholding for 

  Failure to Comply; Deferral and Disallowance of Claims; Reduction of 

                        Federal Medical Payments

 

Sec.  457.204  Withholding of payment for failure to comply with 



Federal requirements.



    (a) Basis for withholding. CMS withholds payments to the State, in 

whole or in part, only if, after giving the State notice, a reasonable 

opportunity for correction, and an opportunity for a hearing, the 

Administrator finds--

    (1) That the plan is in substantial noncompliance with the 

requirements of title XXI of the Act; or

    (2) That the State is conducting its program in substantial 

noncompliance with either the State plan or the requirements of title 

XXI of the Act. (Hearings are generally not called until a reasonable 

effort has been made to resolve the issues through conferences and 

discussions. These efforts may be continued even if a date and place 

have been set for the hearing.)

    (b) Noncompliance of the plan. A question of noncompliance of a 

State plan may arise from an unapprovable change in the approved State 

plan or the failure of the State to change its approved plan to conform 

to a new Federal requirement for approval of State plans.

    (c) Noncompliance in practice. A question of noncompliance in 

practice may arise from the State's failure to actually comply with a 

Federal requirement, regardless of whether the plan itself complies with 

that requirement.

    (d) Notice, reasonable opportunity for correction, and 

implementation of withholding. If the Administrator makes a finding of 

noncompliance under paragraph (a) of this section, the following steps 

apply:

    (1) Preliminary notice. The Administrator provides a preliminary 

notice to the State--

    (i) Of the findings of noncompliance;

    (ii) The proposed enforcement actions to withhold payments; and

    (iii) If enforcement action is proposed, that the State has a 

reasonable opportunity for correction, described in paragraph (d)(2) of 

this section, before the Administrator takes final action.

    (2) Opportunity for corrective action. If enforcement actions are 

proposed, the State must submit evidence of corrective action related to 

the findings of noncompliance to the Administrator within 30 days from 

the date of the preliminary notification. Corrective action is action to 

ensure that the plan is, and will be, administered consistent with 

applicable law and regulations, to ameliorate past deficiencies in plan 

administration, or to ensure that enrollees will be treated equitably.

    (3) Final notice. Taking into account any evidence submitted by the 

State under paragraph (d)(2) of this section, the Administrator makes a 

final determination related to the findings of noncompliance, and 

provides a final notice to the State--

    (i) Of the final determination on the findings of noncompliance;

    (ii) If enforcement action is appropriate--

    (A) No further payments will be made to the State (or that payments 

will be made only for those portions or aspects of the programs that are 

not affected by the noncompliance); and

    (B) The total or partial withholding will continue until the 

Administrator is satisfied that the State's plan and practice are, and 

will continue to be, in compliance with Federal requirements.

    (4) Hearing. An opportunity for a hearing will be provided to the 

State prior to withholding under paragraph (d)(5) of this section.

    (5) Withholding. CMS withholds payments, in whole or in part, until 

the Administrator is satisfied regarding the State's compliance.



[65 FR 33622, May 24, 2000, as amended at 66 FR 2674, Jan. 11, 2001]