Entities operating under an agency payment withhold should take notice of a new law that went into effect on May 24, 2025. Minnesota Statutes Section 15.013 adds specificity and clarification regarding timing and notice requirements that agencies must comply with to withhold payments when an “agency head determines that a preponderance of the evidence shows that the program participant has committed fraud to obtain payments under the [applicable] program.”

Under the law, the term “fraud” is the “ intentional or deliberate act to deprive another of property or money or to acquire property or money by deception,” and includes “knowingly submitting false information” to a government entity for the “purpose of obtaining a greater compensation or benefit than the person is legally entitled,” as well as committing crimes, such as theft, perjury, or forgery under state or federal law. The new law affects “program participants,” which are defined as “an entity, or an individual on behalf of an entity, that receives, disburses, or has custody of funds or other resources transferred or disbursed under a program.” “Agency” is also broadly defined to include any state officer, employee, board commission, authority, department, or other agency of the executive branch of state government and also includes Minnesota State Colleges and Universities.

The new administrative payment withhold law is of particular significance to health care providers, especially those that receive Medical Assistance (“MA”) reimbursement through the Department of Human Services (“DHS”). Recent investigations by DHS have led to widespread and well-publicized allegations of fraud and abuse within Minnesota’s MA program, which has resulted in DHS shutting down an entire reimbursement program, including housing stabilization services, as well as targeted accusations of fraud aimed at numerous personal care assistance programs, among other programs.

The new statute requires that an agency provide “at least 24 hours” notice of the decision to withhold payments “before withholding a payment” and directs that the withholding period cannot “exceed 60 days.” The notice must cite to the new law, include the effective date of the payment withhold, list the reasons for the payment withhold, and include the date that the administrative withholding period terminates. Importantly, entities have a right to appeal the payment withhold decision by requesting a contested case hearing under Minnesota Statutes Chapter 14, “or by petitioning the court for relief, including injunctive relief.”

These new requirements both complement and significantly update current laws regulating DHS administrative payment withholds. For example, under the existing law, DHS is not required to give prior notice of a payment withhold and the payment withhold typically went into effect before recipients had notice. The standard for initiating a withhold is now better defined, affording providers greater procedural fairness. Under the existing law, DHS could withhold based on a “credible allegation of fraud” which only required fraud allegations that had “an indicium of reliability.” Now, under Section 15.013, a higher standard of proof is required, and the agency has authority to withhold only if it “determines that a preponderance of the evidence shows that the program participant has committed fraud.”

Lastly, perhaps the most important update is the 60-day limit on payment withholds. DHS investigations routinely extend for months (and sometimes years) without resolution. This has resulted in an extreme burden for providers, and in some instances forcing a business to shut its doors, even when no wrongdoing occurred. Although investigations can still extend beyond 60 days, limiting the payment withhold will help level the playing field for providers impacted as collateral during DHS’ sweeping investigations in response to Minnesota’s Medicaid fraud crisis.

If you are an entity facing an administrative payment withhold implemented by a government agency, Winthrop & Weinstine, P.A. can help you assert your legal rights and protect your business.

September 25, 2025