(a) Upon receipt of a credible allegation of fraud as defined in subdivision (d) and for which an investigation is pending under the Medi-Cal program against a provider as defined in Section 14043.1, or the commencement of a suspension under Section 14123, the provider shall be temporarily placed under payment suspension, unless it is determined there is a good cause exception, as defined in subdivision (g), not to suspend the payments or to suspend them only in part, and the department may do any of the following:

(1) Collect any Medi-Cal program overpayment identified through an audit or examination, or any portion thereof from any provider. Notwithstanding § 100171 of the Health and Safety Code, a provider may appeal the collection of overpayments under this section pursuant to procedures established in Article 5.3 (commencing with Section 14170). Overpayments collected under this section shall not be returned to the provider during the pendency of any appeal and may be offset to satisfy audit or appeal findings if the findings are against the provider. Overpayments will be returned to a provider with interest if findings are in favor of the provider.

(2) Give notification of the payment suspension for any goods, services, supplies, or merchandise, or any portion thereof. The department shall notify the provider within five days of any payment suspension under this section. The department may delay notification to the provider by 30 days if it is requested to do so in writing by any law enforcement agency, which may be renewed in writing up to two times and in no event may exceed 90 days. The notice to the provider shall do all of the following:

(A) State that the payment suspension is being imposed in accordance with this subdivision and that the payment suspension is for a temporary period and will not continue if it is determined that no credible allegation of fraud remains against the provider or when legal proceedings relating to the allegation are complete.

(B) Cite the circumstances under which the payment suspension will be terminated.

(C) Specify, when appropriate, the type or types of claims for which payment is being suspended.

(D) Inform the provider of the right to submit written evidence that would be admissible under the administrative adjudication provisions of Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, for consideration by the department.

(b) Notwithstanding § 100171 of the Health and Safety Code, a provider may appeal a payment suspension pursuant to Section 14043.65. Payments suspended under this section shall not be returned to the provider during the pendency of any appeal and may be offset to satisfy audit or appeal findings.

(c) A payment suspension may be lifted when a resolution of an investigation for fraud or abuse occurs as defined in subdivision (p) of Section 14043.1.

(d) An allegation of fraud shall be considered credible if it exhibits indicia of reliability as recognized by state or federal courts or by other law sufficient to meet the constitutional prerequisite to a law enforcement search or seizure of comparable business assets. The department shall carefully consider the allegations, facts, data, and evidence with the same thoroughness as a state or federal court would use in approving a warrant for a search or seizure.

(e) (1) On a quarterly basis, the Department of Justice, and any other law enforcement agency that has accepted referrals for investigation from the department, shall submit a report to the department listing each referral and stating whether the referral continues to be under investigation and whether it involves a credible allegation of fraud. If the Department of Justice or a law enforcement agency fails to submit a report under this subdivision, the department may request the report from the Department of Justice or the law enforcement agency on no more than a quarterly basis. The Department of Justice or the law enforcement agency, as applicable, shall provide the report within 30 days of the request.

(2) Notwithstanding paragraph (1), no quarterly report shall be required from a law enforcement agency, unless that law enforcement agency has either received a referral from the department or reported an open case to the department and has not yet reported rejection or closure of that referral or open case.

(f) A report, request, or notification submitted under this section shall be exempt from the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code). These records may be disclosed to law enforcement agencies or other government entities that execute an agreement conforming to paragraph (5) of subdivision (c) of § 7921.505 of the Government Code.

(g) For purposes of this section, all of the following apply:

(1) “Provider” has the same meaning as that term is defined in Section 14043.1.

(2) “Good cause exception” means a reason determined by the department that falls under Section 455.23(e) or (f) of Title 42 of the Code of Federal Regulations.

(3) “Law enforcement agency” includes any agency employing peace officers, as defined in Chapter 4.5 (commencing with Section 830) of Title 3 of Part 2 of the Penal Code.

(h) The director may, in consultation with interested parties, adopt regulations to implement this section as necessary. These regulations may be adopted as emergency regulations in accordance with the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) and the adoption of the regulations shall be deemed to be an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare. The director shall transmit these emergency regulations directly to the Secretary of State for filing and the regulations shall become effective immediately upon filing. Upon completion of the formal regulation adoption process and prior to the expiration of the 120-day duration period of emergency regulations, the director shall transmit directly to the Secretary of State the adopted regulations, the rulemaking file, and the certification of compliance as required by subdivision (e) of § 11346.1 of the Government Code.

(Amended by Stats. 2021, Ch. 615, Sec. 452. (AB 474) Effective January 1, 2022. Operative January 1, 2023, pursuant to Sec. 463 of Stats. 2021, Ch. 615.)