In a July 2, 2025, press release, the U.S. Department of Justice (DOJ) announced a new “DOJ-HHS False Claims Act Working Group” (the Working Group) and identified multiple priority enforcement efforts for the Working Group to address health care fraud and abuse. (The press release also encourages the submission of tips and complaints on waste and mismanagement.) Membership in the Working Group will include leadership from the U.S. Department of Health and Human Services (HHS) Office of General Counsel, the Centers for Medicare & Medicaid Services (CMS) Center for Program Integrity, the Office of Counsel to the HHS Office of Inspector General (OIG), and DOJ’s Civil Division. 

As pertinent to this discussion, DOJ’s press release noted that as part of its efforts to address cases, the Working Group “shall discuss considerations bearing on whether HHS should implement a payment suspension pursuant to 42 C. F.R. § 405.370….” Although CMS has several bases upon which it can impose payment suspensions, including “reliable information that an overpayment exists,” 42 C.F.R. § 405.371, its quickest and most deadly tool in the suspension arsenal is a suspension based on a “credible allegation of fraud.” 

What is a Medicare Payment Suspension?

As defined by 42 C.F.R. § 405.370, a Medicare payment suspension is the withholding of payment by a Medicare contractor from a provider or supplier of an approved Medicare payment amount before a determination of the amount of the overpayment exists, or until the resolution of an investigation of a credible allegation of fraud. A payment suspension may be applied against part or all of Medicare payments. 42 C.F.R. § 405.371(a). Notice to the provider or supplier may be waived if harm to the trust fund is suspected. 42 C.F.R. § 405.372. There is no administrative process to appeal a suspension. 42 C.F.R. § 405.374.

What is a Credible Allegation of Fraud?

One basis for a Medicare payment suspension is when there is a “credible allegation of fraud.” This basis for a payment suspension was added by the Affordable Care Act and codified at 42 U.S.C. § 1395y(o) for Medicare, with a Medicaid corollary at 42 U.S.C. § 1396b(i)(2). The term is not defined in the statute, although the statute does say “a fraud hotline tip (as defined by the Secretary) without further evidence shall not be treated as sufficient evidence for a credible allegation of fraud.” 42 U.S.C. § 1395y(o)(4).

In implementing regulations at 42 C.F.R. § 405.370, CMS defines a “credible allegation of fraud” as an allegation of fraud from any source, including but not limited to the following: (1) fraud hotline tips [defined as a complaint or other communications submitted through a fraud reporting phone number or a website intended for the same purpose, e.g., the HHS-OIG Hotline] verified by further evidence; (2) claims data mining; and (3) patterns identified through provider audits, False Claims Act (FCA) cases, and investigations.

By statute, HHS shall consult with HHS-OIG in determining whether there is a credible allegation of fraud against a provider of services or supplier. 42 U.S.C. § 1395y(o)(2). 

In a provision of its Program Integrity Manual, CMS notes that fraud suspensions may also be used for “reasons not typically viewed within the context of false claims,” e.g., a determination by the Quality Improvement Organization (QIO) that diagnosis-related groups have been upcoded, suspected violations of the physician self-referral ban, and credible allegations of kickbacks underlying medically necessary items or services. CMS Program Integrity Manual, Chap. 8, Sec. 8.3.1.1. 

Similar provisions apply to state Medicaid programs (although Medicaid is not addressed in 42 U.S.C. § 405.370, the provision cited in the press release as the basis for Working Group’s consideration). The State Medicaid agency must suspend all Medicaid payments to a provider after the agency determines there is a credible allegation of fraud for which an investigation is pending under the Medicaid program against an individual or entity unless the agency has good cause to not suspend payments or to suspend payment only in part. 42 C.F.R. § 455.23; see also 42 C.F.R. § 447.90 (Federal Financial Participation funding).

How Long Do Medicare Payment Suspensions Last?

Medicare payment suspensions are expected to last no longer than 18 months, although the period may be extended if the case has been referred to, and is being considered by, HHS-OIG, or if DOJ submits a written request to continue the suspension. CMS must evaluate whether there is good cause to not continue a suspension every 180 days after the initiation of a suspension. See 42 C.F.R. § 405.372(d).

Can the Imposition of a Medicare Payment Suspension be Appealed?

As noted above, there is no administrative process to appeal a suspension. 42 C.F.R. § 405.374. Providers and suppliers can submit a rebuttal, and CMS will consider evidence of “good cause” that would justify a discontinuation of the suspension. The lack of a formal appeal process has resulted in multiple court actions seeking temporary restraining orders or other injunctive relief. These are most often unsuccessful due to jurisdictional challenges, except for some bankruptcy court actions. 

How Should Providers or Suppliers Respond if Notified of a Medicare Payment Suspension? 

• Act immediately to identify options: the process for rebuttal moves very quickly. Rebuttal is unlikely to be successful, but the provider or supplier should get a response on record. 
• CMS has some latitude to suspend payments in part – there may be a way to limit the suspension to a certain stratification or even percentage of payments, especially if there is a beneficiary access issue. See CMS Program Integrity Manual, Chap. 8, Sec. 8.3.1.1 for a discussion of “good cause” exceptions. 
• Identify the concerns behind the “credible allegation” and craft a response, e.g., analyze patient charts requested for review post-suspension and be able to defend them. 
• There may be some latitude for emergency releases of funds upon a showing of extreme need, e.g., meeting payroll. 

Conclusion

As the Trump Administration ramps up its enforcement efforts against fraud, waste, and abuse, providers and suppliers are now expressly on notice to expect that governmental enforcers will place increased reliance on payment suspensions, most likely those based on credible allegations of fraud. Suspensions in some cases may be imposed without advance notice, and there is no pathway for appeal, although an opportunity for rebuttal is offered. Providers and suppliers subject to such suspensions may face months without Medicare payments, but in appropriate situations may be able to work with government enforcers to quicken the process and/or limit the scope. Providers and suppliers facing payment suspensions should be prepared to act quickly to respond, and advice of experienced counsel is recommended.