Heightened Scrutiny: HHS Denies Recertification of New York's Medicaid Fraud Control Unit
On the heels of decertifying Hawaii's Medicaid Fraud Control Unit ("MFCU"), the U.S. Department of Health and Human Services Office of Inspector General ("HHS-OIG") took the extraordinary step of denying the annual recertification request of New York's MFCU, underscoring heightened federal scrutiny of state Medicaid fraud enforcement programs.
On June 30, 2026, HHS-OIG denied New York's MFCU recertification request, suspending the unit's federal grant funding—which comprises 75% of the unit's total funding for fiscal 2026—through September 30, 2026, the end of its current grant period. The decision comes less than a month after HHS-OIG's June 4, 2026, decertification of Hawaii's MFCU. The New York decision is especially significant given the size and the scale of this state's MFCU and its overall Medicaid program, each of which is the second largest in the nation.
HHS-OIG cited several reasons for its decision but mainly focused on what it characterized as the low volume of prosecutions carried out by New York's MFCU in the areas of criminal fraud and patient abuse and neglect. HHS-OIG primarily attributed the unit's "low criminal case outcomes" to its decision to focus on complex civil fraud enforcement. HHS-OIG noted, however, that the unit's focus on civil fraud enforcement "produced results," putting it "third out of five among similar-sized Units over the last five years for combined recoveries." HHS-OIG also cited the following additional bases for decertifying the unit: staff composition ill-suited for prosecutions of fraud and patient abuse and neglect, low volume and quality of referrals from managed care organizations ("MCOs"), slow case progression, and limited cooperation with HHS-OIG and other federal agencies.
HHS-OIG set forth a number of corrective actions that New York's MFCU must take in order to regain its certification and funding, including developing plans designed to improve criminal enforcement, increase referrals from MCOs, speed case progression, realign staff, and deepen cooperation with HHS-OIG. The unit has 30 days to develop these plans and 90 days to provide a progress report.
If New York's MFCU follows this guidance, Medicaid stakeholders will likely see a renewed emphasis on criminal enforcement. This could draw heightened scrutiny to nursing and home care aides and providers, mental health facilities, durable medical equipment suppliers, individual providers, and other provider categories historically associated with MFCU criminal enforcement. Additionally, HHS-OIG's prescribed corrective action plan may drive new civil and criminal fraud investigations based on increased coordination with, and referrals from, MCOs, while also leading New York's MFCU to charge, resolve, or close long-running civil and criminal investigations in response to HHS-OIG's criticism of its case progression.
