A Medicare contractor can stop every claim payment to your practice before it proves an overpayment ever occurred. Under 42 CFR 405.371, CMS or a Medicare contractor may suspend payments on reliable information that an overpayment exists, or on a credible allegation of fraud confirmed through consultation with the HHS Office of Inspector General. For a physician practice that runs on Medicare receivables, a suspension can cut off cash flow within days of the notice, long before any hearing determines whether the underlying claims were actually wrong.
Two Grounds for a Medicare Payment Suspension
Section 405.371(a) authorizes two distinct grounds for a payment suspension. The first applies whenever CMS or a Medicare contractor possesses reliable information that an overpayment exists or that pending payments may not be correct, a standard broad enough to cover an ordinary billing or coding dispute flagged in a post-payment audit. The second applies only after CMS has consulted with the OIG, and as appropriate the Department of Justice, and determined that a credible allegation of fraud exists against the provider. Under 42 CFR 405.370, a credible allegation of fraud can originate from a verified fraud hotline tip, claims data mining, or a pattern identified through a Unified Program Integrity Contractor audit, a civil False Claims Act case, or a law enforcement investigation.
Notice and the Right to a Rebuttal Statement
Once CMS or the contractor decides to suspend payments, 42 CFR 405.372 generally requires written notice of the intended suspension and the reasons for it. Three exceptions let a suspension proceed without that advance notice: a provider's failure to furnish a required cost report or other information, a determination that prior notice would harm the Medicare Trust Funds, and a suspension based on a credible allegation of fraud, where CMS decides in consultation with OIG whether and when notice can be given without compromising the investigation. Where notice is given, the provider has at least 15 days from the date of the notice under 42 CFR 405.374 to submit a written rebuttal statement explaining why the suspension should not take effect. The contractor may shorten that window for cause or extend it. The rebuttal is the practice's only chance to argue against the suspension before payments stop, often while the practice is still responding to the additional documentation request that triggered the underlying audit.
How Long a Suspension Can Last
For a suspension based on reliable information of an overpayment, 42 CFR 405.372(d) limits the suspension to 180 days from its start date, with one written request available for a single 180-day extension, an outer limit of 360 days. Those time limits do not apply to a suspension based on a credible allegation of fraud. The regulation still describes a fraud-based suspension as temporary, and 42 CFR 405.371(b) requires CMS to reevaluate every 180 days whether good cause remains to continue it. Good cause to continue is deemed to end automatically once 18 months pass without resolution of the investigation, unless OIG or the Department of Justice makes a written request that the suspension continue because of an active criminal or civil proceeding.
A payment suspension can stop cash flow immediately, on reliable information or a credible allegation alone, long before any hearing determines whether an overpayment or fraud actually occurred.
What It Takes to Restore Payments
A payment suspension is not a final determination of liability. It freezes cash flow while CMS or the contractor works through the underlying audit process, or while OIG and the Department of Justice continue a fraud investigation. Payments resume once CMS determines good cause to suspend no longer exists, once the 180-day and 360-day limits run on a non-fraud suspension, or once the underlying matter resolves. If the audit ultimately confirms an overpayment, the suspended funds are applied against the recoupment; if it does not, the withheld payments are released. Because a suspension can run alongside a Medicare prepayment review on new claims, a single audit trigger can affect both money already earned and money not yet billed.
Why Early Legal Counsel Is Critical
It is critical that physicians and other Medicare providers promptly retain experienced healthcare defense counsel upon receiving a payment suspension notice, an additional documentation request, or any other government inquiry tied to a potential overpayment or fraud allegation. Early legal intervention can protect the provider's rights, shape the rebuttal statement submitted under 42 CFR 405.374, avoid inadvertent admissions, preserve defenses to the underlying audit, and allow counsel to communicate with the contractor and CMS on the provider's behalf. Delaying legal representation can significantly affect the outcome of the suspension and expose the practice to unnecessary financial risk.
How Health Law Alliance Can Help
Health Law Alliance represents physicians and healthcare providers facing Medicare payment suspensions, from preparing the rebuttal statement within the 15-day window to negotiating the underlying overpayment or fraud allegation that triggered the suspension. If your practice has received a Medicare payment suspension notice or an audit that could lead to one, contact us for a free, confidential consultation.
