Substitute House Bill No. 5354 modifies the conditions under which the Department of Social Services (DSS) can determine overpayment or underpayment to Medicaid providers through extrapolation during audits. The bill stipulates that DSS cannot base its findings on extrapolated projections unless there is evidence of a sustained or high level of payment errors by the provider, a good faith determination of vendor fraud by the commissioner, or if previous educational interventions have failed to rectify the errors. Additionally, the bill maintains that extrapolated overpayments must exceed 1.75% of total claims paid to the provider during the audit period for such findings to be valid.

Furthermore, the bill limits the recoupment of extrapolated overpayments from pharmacists or pharmacies to the total professional dispensing fees associated with the overpayment, unless the commissioner has determined vendor fraud in good faith. This change aims to reduce the financial impact on providers and is expected to save the state approximately $160,000 in FY 27 and $165,000 in FY 28. The bill will take effect on July 1, 2026.