902 KAR 18:060. Vendor violations and sanctions.

CABINET FOR HEALTH AND FAMILY SERVICES

Department for Public Health

Division of Maternal and Child Health

(New Administrative Regulation)

902 KAR 18:060. Vendor violations and sanctions.

RELATES TO: KRS Chapter 13B, 194A.050, 194A.505, 194A.990, 7 C.F.R. Parts 246, 278.6, 21 U.S.C. 802 sec. 102

STATUTORY AUTHORITY: KRS 194A.050, 211.090(3), 7 C.F.R. Part 246, 42 U.S.C. 1786

NECESSITY, FUNCTION, AND CONFORMITY: 42 U.S.C. 1786 and 7 C.F.R. Part 246, provide for grants for state operation of the Special Supplemental Nutrition Program for Women, Infants and Children (WIC). KRS 194A.050(1) authorizes the cabinet for Health and Family Services to promulgate administrative regulations as necessary to qualify for the receipt of federal funds. This administrative regulation establishes the Vendor Violations and Sanctions in regards to the Kentucky Special Supplemental Nutrition Program for Women, Infants and Children (WIC).

Section 1. Vendor Violations and Sanctions. (1) In addition to any criminal penalty imposed pursuant to KRS 194A.990, the cabinet shall impose one (1) or more of the following civil sanctions for designated violations committed by a vendor, his employee or agent:

(a)1. Vendor violation: Failure to meet the authorization criteria in section KAR 18:050.

2. Pattern of incidence and length of disqualification:

a. First occurrence: a sixty (60) day disqualification from the WIC Program shall be issued.

b. Second occurrence: a ninety (90) day disqualification from the WIC Program shall be issued.

c. Third and subsequent occurrences: 120 day disqualification from the WIC Program shall be issued.

(b)1. Vendor violation: failure to pay a claim within thirty (30) days of receipt of initial State WIC Agency notification letter. Before issuance of a sanction, the State WIC Agency shall:

a. Mail a letter to the vendor requesting payment by a specified date;

b. If payment is not received, contact the vendor by either email or telephone, reminding vendor of payment due.

c. If payment is not received, send a second letter by certified mail, return receipt requested, of past due claim.

2. Pattern of incidence and length of disqualification.

a. First occurrence: a six (6) month disqualification from the WIC Program shall be issued.

b. Second occurrence and subsequent occurrences: a one (1) year disqualification from the WIC Program shall be issued.

(c)1. Vendor violation: Failure to return the WIC vendor authorization stamp and XAC device (if applicable) within twenty (20) days of receipt of disqualification or termination letter. Before issuance of a sanction, the state agency shall contact the vendor by telephone to request the return of the stamp and XAC device. Integrated systems will be disconnected on effective date of disqualification or termination.

2. Pattern of incidence and length of disqualification: six (6) months shall be added to the previously established disqualification period.

(d)1. Vendor violation: Store personnel requesting the PIN.

2. Pattern of incidence and length of disqualification: two (2) positive buys out of three (3) shall result in a one (1) year disqualification from the WIC Program.

(e)1. Vendor violation: Using the integrated or WIC XAC device Cash Value Benefits (CVB) functionality to provide nonproduce food item(s).

2. Pattern of incidence and length of disqualification: two (2) positive buys out of three (3) shall result in a one (1) year disqualification from the WIC Program.

(f)1. Vendor violation: providing free merchandise exclusively to participants as an incentive to redeem WIC benefits.

2. Pattern of incidence and length of disqualification: one (1) positive buy out of three (3) shall result in a six (6) month disqualification from the WIC Program.

(g)1. Public notice by a WIC Vendor of providing free merchandise exclusive to participants as an incentive to redeem WIC benefits.

2. Pattern of incidence and length of disqualification: one (1) occurrence shall result in a six (6) month disqualification from the WIC Program.

(h)1. Vendor violation: convicted of trafficking in WIC benefits or selling a firearm, ammunition, an explosive, or controlled substance, as defined in 21 U.S.C. 802 section 102, in exchange for a food instrument.

2. Pattern of incidence and length of disqualification: one (1) positive buy shall result in a permanent disqualification from the WIC Program.

(i)1. Vendor violation: Trafficking in WIC benefits or selling a firearm, ammunition,

an explosive, or controlled substance, as defined in 21 U.S.C. 802 section 102, in exchange for a food instrument.

2. Pattern of incidence and length of disqualification: one (1) positive buy shall result in a six (6) year disqualification.

(j)1. Vendor violation: sale of alcohol or alcoholic beverage or tobacco product in

exchange for a food instrument.

2. Pattern of incidence and length of disqualification: one (1) positive compliance buy shall result in a three (3) year disqualification.

(k) 1. Vendor violation: claiming reimbursement for the sale of an amount of a specific supplemental food item, which exceeds the vendor’s documented inventory of that supplemental food item for a specific period of time.

2. Pattern of incidence and length of disqualification:

a. An inventory audit for a thirty (30) day period which results in more WIC sales than the documented inventory, shall result in a three (3) year disqualification; or

b. An inventory audit for a ninety (90) day period, which results more WIC sales than the documented inventory, shall result in a three (3) year disqualification.

(l)1. Vendor violation: charging a participant more for supplemental food than:

a. A non-WIC customer is charged; or

b. The current shelf price.

2. Pattern of incidence and length of disqualification:

a. Two (2) positive compliance buys out of three (3) shall result in a three (3) year disqualification from the WIC Program if:

(i) The vendor has exhibited a prior pattern of overcharging during the prior federal fiscal year based upon routine monitoring visits which have resulted in two (2) letters for price discrepancies.

(ii) The state agency shall require a vendor who has received two (2) letters for price discrepancies during the federal fiscal year to receive training provided by the state agency.

b. Three (3) positive buys out of three (3) shall result in a three (3) year disqualification for a vendor who does not meet the conditions in clause a. of this subparagraph.

(m)1. Vendor violation: receiving, transacting and/or redeeming food instruments outside of authorized channels, including the use of an unauthorized vendor and/or unauthorized person.

2. Pattern of incidence and length of disqualification: two (2) positive compliance buys out of three (3) shall result in a three (3) year disqualification.

(n)1. Vendor violation: charging for supplemental food not received by the participant, such as charging for one (1) food item or more listed on the WIC benefits but not purchased by the WIC participant.

2. Pattern of incidence and length of disqualification: three (3) positive compliance buys out of three (3) shall result in a three (3) year disqualification.

(o)1. Vendor violation:

a. Providing credit, an IOU, a rain check, a due bill, or a store credit; or

b. Providing a nonfood item other than cash, alcohol, tobacco, firearms, ammunition, explosives or controlled substances, as defined in 21 U.S.C. 802 section 102, in exchange for WIC benefits.

2. Pattern of incidence and length of disqualification: two (2) positive compliance buys out of three (3) shall result in a three (3) year disqualification.

(p)1. Vendor violation: providing an unauthorized food item or items in exchange for a food instrument.

2. Pattern of incidence and length of disqualification: three (3) positive compliance buys out of four (4) shall result in a one (1) year disqualification.

(q)1. Vendor violation: charging for supplemental food provided in excess of those listed on the food instrument.

2. Pattern of incidence and length of disqualification: three (3) positive compliance buys out of four (4) shall result in a one (1) year disqualification.

(r) A vendor who has been disqualified from the "SNAP" shall be disqualified from the WIC Program for the same length of time as the "SNAP" disqualification.

(s)1. A vendor who has been assessed a civil money penalty by "SNAP", as provided under 7 C.F.R. 278.6, shall be disqualified from the WIC Program for the same length of time for which the vendor would have been disqualified from "SNAP" unless the WIC Program determines that disqualification would result in inadequate participant access, in which case a penalty shall not be assessed.

2. The vendor is entitled to a KRS Chapter 13B hearing based upon the sanction in 12.1(s).

(2)(a) Except for violations identified in subsection 1(f) through (k), (l)(2)a. and b., (r) and (s) of this section, the state agency shall notify a vendor in writing if an investigation reveals a potential initial violation. The vendor shall be notified before another violation is documented unless the state agency determines that notifying the vendor would compromise an investigation.

(b) The notification determination shall be made on a case by case basis.

1. The vendor is identified as a HIRISK vendor according to the WIC Vendor Manual; and

2. One (1) or more of the same type violation occurred within the same Federal fiscal year of prior Federal fiscal year and the vendor has received prior notification; and

3. Sending a notification letter would divulge the identity of the investigator.

(3) If multiple vendor violations are found during an investigation, the length of the disqualification shall be determined by the most serious violation.

(4) If a vendor who has previously received two (2) or more of the mandatory sanctions designated in subsection (1)(f) through (p) of this section receives another sanction for a violation designated in subsection (1)(f) through (p) of this section, the third and all subsequent sanctions shall be doubled. A civil monetary penalty shall not be assessed for a third or subsequent sanction.

STEVE DAVIS, M.D., Acting Commissioner

AUDREY TAYSE HAYNES, Secretary

APPROVED BY AGENCY: December 13, 2012

FILED WITH LRC: December 14, 2012 at 9 a.m.

PUBLIC HEARING AND PUBLIC COMMENT PERIOD: A public hearing on this administrative regulation shall, if requested, be held on January 22, 2013 at 9:00 a.m. in Suite C. Individuals interested in attending this hearing shall notify this agency in writing by January 14, 2013, five (5) workdays prior to the hearing, of their intent to attend. If no notification of intent to attend the hearing is received by that date, the hearing may be canceled. The hearing is open to the public. Any person who attends will be given an opportunity to comment on the proposed administrative regulation. A transcript of the public hearing will not be made unless a written request for a transcript is made. If you do not wish to attend the public hearing, you may submit written comments on the proposed administrative regulation. You may submit written comments regarding this proposed administrative regulation until close of business January 31, 2013. Send written notification of intent to attend the public hearing or written comments on the proposed administrative regulation to:

CONTACT PERSON: Jill Brown, Office of Legal Services, 275 East Main Street 5 W-B, Frankfort, Kentucky 40601, phone 502-564-7905, fax 502-564-7573.

REGULATORY IMPACT ANALYSIS AND TIERING STATEMENT

Contact Person: Carlene Egbert 564-3827 x 3840

(1) Provide a brief summary of:

(a) What this administrative regulation does: This administrative regulation establishes the vendor violations and sanctions in regards to the Kentucky Special Supplemental Nutrition Program for Women, Infants and Children (WIC).

(b) The necessity of this administrative regulation: KRS 194A.050(1) authorizes the cabinet for Health and Family Services to promulgate administrative regulations as necessary to qualify for the receipt of federal funds. This administrative regulation establishes the vendor violations and sanctions in regards to the Kentucky Special Supplemental Nutrition Program for Women, Infants and Children (WIC).

(c) How this administrative regulation conforms to the content of the authorizing statutes: The cabinet has responsibility under KRS 194A.050 to promulgate, administer, and enforce those administrative regulations necessary to implement programs mandated by federal law, or to qualify for the receipt of federal funds. This administrative regulation establishes the vendor violations and sanctions in regards to the Kentucky Special Supplemental Nutrition Program for Women, Infants and Children (WIC).

(d) How this administrative regulation currently assists or will assist in the effective administration of the statutes: This administrative regulation will outline vendor violations and the applicable penalties for those violations.

(2) If this is an amendment to an existing administrative regulation, provide a brief summary of:

(a) How the amendment will change this existing administrative regulation: This is a new regulation.

(b) The necessity of the amendment to this administrative regulation: This is a new regulation.

(d) How the amendment will assist in the effective administration of the statutes: This is a new regulation.

(3) List the type and number of individuals, businesses, organizations, or state and local governments affected by this administrative regulation: The Department for Public Health, Local Health Agencies (61), WIC sites (148) WIC Vendors (886) and WIC Participants (128,883).

(4) Provide an analysis of how the entities identified in question (3) will be impacted by either the implementation of this administrative regulation, if new, or by the change, if it is an amendment, including:

(a) List the actions that each of the regulated entities identified in question (3) will have to take to comply with this administrative regulation or amendment: No additional changes in the actions will need to be made from the Department of Public Health, Local Health Agencies, Local WIC Sites Vendors and WIC Participants.

(b) In complying with this administrative regulation or amendment, how much will it cost each of the entities identified in question (3): The Department for Public Health, Local Agencies, Local WIC site, Vendors and WIC Participants will not experience an increase in cost to comply with the regulation.

(c) As a result of compliance, what benefits will accrue to the entities identified in question (3): This administrative regulation will outline vendor violations and the applicable penalties for those violations. The violations and penalties have been revised to incorporate the new WIC electronic benefit delivery system (EBT).

(5) Provide an estimate of how much it will cost the administrative body to implement this administrative regulation:

(a) Initially: There would be no additional cost to the cabinet to implement and enforce this administrative regulation.

(b) On a continuing basis: On a continuing basis, additional funding is not required.

(6) What is the source of the funding to be used for the implementation and enforcement of this administrative regulation: The initial funding was from a grant from the USDA Food and Nutrition Services. There would be no additional cost to the cabinet to implement and enforce this administrative regulation.

(7) Provide an assessment of whether an increase in fees or funding will be necessary to implement this administrative regulation, if new or by the change if it is an amendment: No fees or new funding will be required to implement this regulation.

(8) State whether or not this administrative regulation established any fees or directly or indirectly increased any fees: This regulation does not establish fees either directly or indirectly.

(9) TIERING: Is tiering applied? Tiering is not appropriate in this administrative regulation since it applies equally to all those individuals or entities.

FISCAL NOTE ON STATE OR LOCAL GOVERNMENT

1. What units, parts or divisions of state or local government (including cities, counties, fire departments, or school districts) will be impacted by this administrative regulation? This regulation will impact the Department of Public Health, Local Health Agencies, WIC Sites, WIC Vendors and WIC participants.

2. Identify each state or federal statute or federal regulation that requires or authorizes the action taken by the administrative regulation. KRS 194A.050 authorizes the Department for Public Health to promulgate, administer, and enforce those administrative regulations in accordance with C.F.R. 7, Chapter 11, Volume 4, Part 246.

3. Estimate the effect of this administrative regulation on the expenditures and revenues of a state or local government agency (including cities, counties, fire departments, or school districts) for the first full year the administrative regulation is to be in effect.

(a) How much revenue will this administrative regulation generate for the state or local government (including cities, counties, fire departments, or school districts) for the first year? No new revenue will be generated for state or local government in the first year of implementing this regulation.

(b) How much revenue will this administrative regulation generate for the state and local government (including cities, counties, fire departments, or school districts) for subsequent years? No new revenue will be generated for state or local government in the subsequent years of implementing this regulation.

(c) How much will it cost to administer this program for the first year? There is no cost to the local or state governments to implement this regulation the first year.

(d) How much will it cost to administer this program for the subsequent years? There is no cost to the local or state governments to implement this regulation for subsequent years.

Note: If specific dollar estimates cannot be determined, provide a brief narrative to explain the fiscal impact of the administrative regulations.

Revenues (+/-):

Expenditures (+/-):

Other Explanation: