N.Y. Comp. Codes R. & Regs. tit. 14, § 512.14 – Quality improvement.

(a) The provider of service shall establish a process to collect and analyze data on program and individual outcomes. A process shall be established for the routine use of such data for decision-making purposes. In association with the achievement of individual outcomes and reviews of related processes, providers of service are encouraged to use evidence-based practices.
(b) The office, in conjunction with local governmental units, will develop a plan regarding oversight and evaluation criteria for PROS programs, including the development of performance indicators.
1. (1) Each local governmental unit shall decide the level of its participation in the oversight and evaluation of PROS programs. Such participation shall include the execution of signed agreements between the local governmental unit and each PROS program in the geographic area served by the local governmental unit. Such provider agreements may include performance indicators specified by the local governmental unit and approved by the office.
2. (2) If the local governmental unit and the PROS provider are unable to execute an agreement in accordance with paragraph (1) of this subdivision, the office shall review the situation and, if warranted, may execute an agreement directly with the PROS provider. If the office determines that such an agreement will be executed, it will so notify the local governmental unit.
3. (3) In the event that the PROS program is operated by the local governmental unit, the PROS program shall execute a provider agreement with the office.
(c) Provider agreements executed pursuant to subdivision (b) of this section may include provisions authorizing a withholding of up to 20 percent of the provider's monthly Medicaid payment if the provider fails to comply with applicable data and reporting requirements, operational requirements, or performance indicators. Such withholding of Medicaid payments may be continued until the provider attains compliance, at which time previously withheld funds shall be released to the provider.
1. (1) In regard to performance indicators which are related to the outcome of individual usage of PROS services, no withholding of Medicaid revenue for an individual PROS provider pursuant to this subdivision shall occur earlier than the 12th month following the month in which the operating certificate issued for that provider becomes effective, or the 12th month following the effective date of the initial agreement developed pursuant to subdivision (b) of this section, whichever is later.
2. (2) Any withholding of Medicaid payments pursuant to this subdivision does not obviate the authority of the office to initiate other administrative sanctions authorized pursuant to this Title or applicable provisions of the Mental Hygiene Law.