---
kind: "range"
citation: "42 C.F.R. §§ 438.700–438.704"
title: "42"
from: "438.700"
to: "438.704"
count: 3
url: "https://uscodex.org/cfr/42/438.700..438.704"
---

# §438.700. Basis for imposition of sanctions.

- (a) Each State that contracts with an MCO must, and each State that contracts with a PCCM or PCCM entity may, establish intermediate sanctions (which may include those specified in [§ 438.702](/cfr/42/438.702.md)) that it may impose if it makes any of the determinations specified in [paragraphs (b) through (d)](#b..d) of this section. The State may base its determinations on findings from onsite surveys, enrollee or other complaints, financial status, or any other source.
- (b) **A State determines that an MCO acts or fails to act as follows—**
  - (1) Fails substantially to provide medically necessary services that the MCO is required to provide, under law or under its contract with the State, to an enrollee covered under the contract.
  - (2) Imposes on enrollees premiums or charges that are in excess of the premiums or charges permitted under the Medicaid program.
  - (3) Acts to discriminate among enrollees on the basis of their health status or need for health care services. This includes termination of enrollment or refusal to reenroll a beneficiary, except as permitted under the Medicaid program, or any practice that would reasonably be expected to discourage enrollment by beneficiaries whose medical condition or history indicates probable need for substantial future medical services.
  - (4) **Misrepresents or falsifies information that it furnishes to CMS or to the State.**
  - (5) Misrepresents or falsifies information that it furnishes to an enrollee, potential enrollee, or health care provider.
  - (6) Fails to comply with the requirements for physician incentive plans, as set forth (for Medicare) in §§ [422.208](/cfr/42/422.208.md) and [422.210](/cfr/42/422.210.md) of this chapter.
- (c) A State determines that an MCO, PCCM or PCCM entity has distributed directly, or indirectly through any agent or independent contractor, marketing materials that have not been approved by the State or that contain false or materially misleading information.
- (d) **A State determines that—**
  - (1) An MCO has violated any of the other requirements of sections 1903(m) or 1932 of the Act, or any implementing regulations.
  - (2) A PCCM or PCCM entity has violated any of the other applicable requirements of sections 1932 or 1905(t)(3) of the Act, or any implementing regulations.
  - (3) For any of the violations under paragraphs [(d)(1)](#d-1) and [(2)](#d-2) of this section, only the sanctions specified in § [438.702(a)(3)](/cfr/42/438.702.md?p=a-3), [(4)](/cfr/42/438.702.md?p=a-4), and [(5)](/cfr/42/438.702.md?p=a-5) may be imposed.

# §438.702. Types of intermediate sanctions.

- (a) The types of intermediate sanctions that a State may impose under this subpart include the following:
  - (1) Civil money penalties in the amounts specified in [§ 438.704](/cfr/42/438.704.md).
  - (2) Appointment of temporary management for an MCO as provided in [§ 438.706](/cfr/42/438.706.md).
  - (3) Granting enrollees the right to terminate enrollment without cause and notifying the affected enrollees of their right to disenroll.
  - (4) Suspension of all new enrollment, including default enrollment, after the date the Secretary or the State notifies the MCO of a determination of a violation of any requirement under sections [1903(m)](/cfr/42/1903.md?p=m) or [1932](/cfr/42/1932.md) of the Act.
  - (5) Suspension of payment for beneficiaries enrolled after the effective date of the sanction and until CMS or the State is satisfied that the reason for imposition of the sanction no longer exists and is not likely to recur.
- (b) State agencies retain authority to impose additional sanctions under State statutes or State regulations that address areas of noncompliance specified in [§ 438.700](/cfr/42/438.700.md), as well as additional areas of noncompliance. Nothing in this subpart prevents State agencies from exercising that authority.

# §438.704. Amounts of civil money penalties.

- (a) **General rule.** If the State imposes civil monetary penalties as provided under [§ 438.702(a)(1)](/cfr/42/438.702.md?p=a-1), the maximum civil money penalty the State may impose varies depending on the nature of the MCO's, PCCM or PCCM entity's action or failure to act, as provided in this section.
- (b) **Specific limits.**
  - (1) The limit is $25,000 for each determination under § [438.700(b)(1)](/cfr/42/438.700.md?p=b-1), [(5)](/cfr/42/438.700.md?p=b-5), [(6)](/cfr/42/438.700.md?p=b-6), and [(c)](/cfr/42/438.700.md?p=b-c).
  - (2) The limit is $100,000 for each determination under § [438.700(b)(3)](/cfr/42/438.700.md?p=b-3) or [(4)](/cfr/42/438.700.md?p=b-4).
  - (3) The limit is $15,000 for each beneficiary the State determines was not enrolled because of a discriminatory practice under [§ 438.700(b)(3)](/cfr/42/438.700.md?p=b-3). (This is subject to the overall limit of $100,000 under [paragraph (b)(2)](#b-2) of this section).
- (c) **Specific amount.** For premiums or charges in excess of the amounts permitted under the Medicaid program, the maximum amount of the penalty is $25,000 or double the amount of the excess charges, whichever is greater. The State must deduct from the penalty the amount of overcharge and return it to the affected enrollees.