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OIG Exclusion Actions — Mandatory and Permissive Exclusion Authorities


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OIG exclusion actions should be carefully monitored on a monthly basis.The most severe administrative sanctions available under the Social Security Act stems from the authority of the Office of the Inspector General (OIG) of the Department of Health and Human Services (HHS) [1] to “exclude” individuals and entities from participating in Federal health care programs. Indeed, an OIG Exclusion [2] imposed by the OIG is essentially the “nuclear bomb” of administrative sanctions. Excluded individuals and entities are barred from all participation in Federal health care benefit programs, [3] and providers that employ or contract with excluded entities risk the imposition of civil money penalties, and significant overpayment liability. States also have the administrative authority to bar providers from participating in their State Medical Assistance Programs (primarily Medicaid and CHIP). [4] Medicaid Exclusions” [5] are similar to OIG Exclusions in many respects, but there are also important differences. We will discuss the major differences and how they are impacted by Section 6501 of the Affordable Care Act. However, in addition to meeting its regulatory obligations, a rigorous exclusion screening program also provides significant benefits to a provider’s compliance and risk management programs. In fact, in recent guidance from roundtable discussions involving the OIG and industry experts, screening and evaluation of employees was made one of the “Seven Elements of Compliance” in, and of itself. [6]

I.  Scope and Effect of an OIG Exclusion:

OIG Exclusions are administrative actions imposed by the OIG to protect beneficiaries and Federal health care programs by stemming healthcare fraud and abuse. [7] The effect of an OIG Exclusion is extremely broad and intended to prohibit all participation in Federal health care programs by excluded parties. [8] The “payment prohibition” extends to all items or services that are furnished, either directly or indirectly, by an excluded individual or entity, or at the medical direction or on the prescription of an excluded person. [9] Even if a non-excluded provider actually submits a claim, an “indirect claim” is subject to the payment prohibition if an excluded entity directly or indirectly furnished it. [10]

The “payment prohibition” is a complete payment ban applicable to all methods of Federal program reimbursement” regardless of whether it is from an itemized claim, cost report, capitated payment or other bundled payment. It extends beyond direct patient care and includes, for example, services performed by excluded individuals who work for or under an arrangement with a hospital, nursing home, home health agency, or managed care entity where they are separately billed or part of a bundled payment. (See 2013 Special Advisory, at pgs. 6.and 7). Following is a list of services identified by the OIG in the Updated Special Advisory that would be subject to the payment prohibition: 

(1) Management, administrative or any leadership roles; 

(2) Surgical support or other activities that indirectly support care; 

(3) Claims processing and information technology; 

(4) Transportation services including ambulance company dispatchers; 

(5) Selling, delivering or refilling orders for medical devices; 

Even unpaid volunteers can trigger overpayment and CMP liability if the items or services they furnish are not “wholly unrelated to Federal Health Care Programs” and the provider “does not ensure that an appropriate exclusion screening was performed!” [11]

The payment prohibition also extends to providers that furnish items or services on the basis of orders or prescriptions they receive from others. Thus, providers such as laboratories, imaging centers, and pharmacies “should ensure, at the point of service, that the ordering or prescribing physician is not excluded” in order to avoid liability. Similarly, laboratories should ensure that the physicians sending them the order or prescription for services are not excluded. A failure to do so on their part of either would violate the payment prohibition and could result in both overpayments and CMPs. [12]

If an excluded individual or entity submits, or causes to be submitted, a claim during their exclusion period, they are subject to civil money penalty liability under section 1128A(a)(1)(D) of the Social Security Act as well as criminal liability under section 1128B(a)(3). Submitting claims or causing claims to be submitted or payments to be made, for items or services furnished, ordered, or prescribed by an excluded person or entity can serve as the basis for civil money penalties. [13]

II. OIG Exclusion Authorities: Mandatory and Permissive Exclusions 

There are two types of OIG Exclusions – Mandatory and Permissive. Mandatory Exclusions are identified in Sections 1128(a)(1) – 1128(a)(4) of the Social Security Act (SSA), [14] and they are imposed as a result of convictions for program fraud, patient abuse and certain drug offenses. Permissive exclusions, on the other hand, are discretionary and can be imposed for broad range of conduct. These are identified in §1128(b)(1)–§1128(b)(16) and §1156 of the Act. 

Mandatory Exclusions 

Mandatory exclusions be must be imposed for at least five years though they are often imposed for much longer periods if warranted by the underlying facts and circumstances. The Office of Inspector General’s mandatory exclusion authority falls within the following four categories: 

42 C.F.R. § 1128(a)(1): Conviction related to the delivery of an item or services to a Federal or State Health Care Program; [15]

42 C.F.R. § 1128(a)(2): Conviction under State or Federal law relating to neglect or abuse of patient; [16]

42 C.F.R. §  1128(a)(3): Felony conviction relating to health care fraud program (other than Medicare or Medicaid); [17]

42 C.F.R. § 1128(a)(4): Felony conviction under Federal or state law relating to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance. [18]

The requirement of a “conviction” under sections 1128(a)(1) is broadly defined to include nolo contendere pleas, deferred adjudications and dispositions under first offender programs in any “State, Federal or Local Court,” [19] and it has been held that a deferred prosecution agreement in a local State court for misdemeanor theft was a sufficient basis for the imposition of a mandatory exclusion. [20] It is also noted that State Agencies are required to notify the OIG of any criminal convictions in State or local courts convictions that involve an entity that receives Medicaid reimbursements and are related to the delivery of health care items or services under the program. [21]

Permissive Exclusions 

Permissive exclusions are discretionary and, as set forth below, can be imposed for a wide range of conduct; however, the OIG actually this authority over a fairly narrow range of persons and circumstances. The vast majority of permissive exclusions are based on disciplinary actions taken by State licensing boards pursuant to section 1128(b)(4), and most of those actions (approximately 70%) involve individuals connected to the nursing profession. Physicians accounted for only 9% of the permissive exclusions business owners only accounted for 3%. [22]  The following is a summary of the OIG’s permissive exclusion authorities: 

Conviction relating to fraud. [23] Any individual or entity convicted of misdemeanor fraud, theft, embezzlement, breach of fiduciary duty – or other financial misconduct related to the delivery of a health care item or service may be subject to permissive exclusion by OIG. 

Conviction relating to obstruction of an investigation or audit. [24] Any individual or entity convicted of an offense related to the interference with, or obstruction of, an audit or investigation, may be subject to permissive exclusion by OIG. 

Misdemeanor conviction relating to controlled substance. [25] Any individual or entity convicted of a misdemeanor related to the unlawful prescription, manufacture, or dispensing of a controlled substance, may be subject to permissive exclusion by OIG. 

License revocation or suspension. [26] Any individual or entity whose license has been suspended or revoked by a state licensing authority, has surrendered their license or has otherwise lost their ability to apply for or renew their license, based on an individual’s or entity’s professional competence, professional performance, or financial integrity, may be subject to permissive exclusion by OIG. 

Exclusion or suspension under Federal or state health care program. [27] Any individual or entity excluded, suspended, or otherwise sanctioned under any Federal or state program involving the provision of health care. 

Claims for excessive charges or unnecessary services and failure of certain organizations to furnish medically necessary services. [28] Any individual or entity determined to have submitted (or caused to be submitted) claims for excessive charges or unnecessary services or has furnished services in excess of those medically necessary or services that fail to meet profession standards, are subject to permissive exclusion by OIG. 

Fraud, kickbacks, and other prohibited activities. [29] Any individual or entity that the Secretary (delegated to OIG) determines has committed a certain fraud, kickback, and/or other prohibited activity subject to permissive exclusion by OIG. 

Entities controlled by a sanctioned individual. [30] Any individual or entity that (A)(i) has a direct or indirect ownership or control interest of 5 percent or more in the entity, (A)(ii) who serves as an officer, director, agent, or managing employee of that entity, or (A)(iii) who transfers ownership or a control interest to an immediate family member or a member of the household of the sanctioned person who continues to maintain an interest in the entity. Under (B)(i) through (B)(iii), this category also applies to an individual or entity convicted under subsections 42 U.S. C. § 1320a-7(b)(1), (b)(2) or (b)(3) described above. This category also applies to any individual or entity against whom a civil monetary penalty has been assessed. [31] Finally, this category applies to any individual or entity that has been excluded from participation under a state health care program. [32]

Failure to disclose required information. [33] Any entity that did not fully and accurately make any required disclosure [34] is subject to permissive exclusion by OIG. 

Failure to supply requested information on subcontractors and suppliers.[35] Any entity that fails to supply information requested by the Secretary or an State health care agency (within the time period required) may be subject to permissive exclusion. 

Failure to supply payment information. [36] Any individual or entity furnishing, ordering, referring, or certifying the need for items or services payable by Medicare or a state health care program, that fails to provide the information necessary to determine whether payments are or were due, may be subject to permissive exclusion. 

Failure to grant immediate access. [37] Failing to grant immediate access to a reasonable request by the Secretary to: (A) Determine compliance with conditions of participation or payment; (B) Perform required reviews and surveys; (C) Review records, documents, and data needed to perform their statutory functions; or (D) By a state Medicaid Fraud Control Unit (MFCU) to perform their duties may be subject to a permissive exclusion action. 

Failure to take corrective action. [38] Any hospital that fails to comply substantially with a corrective action may be permissively excluded. 

Default on health education loan or scholarship obligations. [39] Any individual in default on repayments of scholarship obligations or loans in connection with health professions education may be subject to a permissive exclusion action by OIG. 

Individuals controlling a sanctioned entity. [40] Any individual who has direct or indirect ownership or control in a sanctioned entity and who knows or should know of the action constituting the basis for the conviction may be subject to permissive exclusion by OIG. 

Making false statements or misrepresentation of material facts. [41] Any individual or entity that knowingly makes or causes to be made any false statement, omission, or misrepresentation of a material fact in any application, agreement, bid, or contract to participate or enroll as a provider of services or supplier under a Federal health care program, may be subject to permissive exclusion. 

III.  OIG’s Criteria for Imposing Its Permissive Exclusion Authority:

In April 2016, OIG issued updated criteria for assessing and evaluating the imposition of permissive exclusions in health care fraud cases. [42] The update replaced the 1997 Federal Register notice. [43] As discussed above, OIG uses its exclusion authority to protect Federal health care programs from individuals or entities “whose continued participation constitutes a risk to the programs and their beneficiaries.” [44]

OIG articulated several factors it will use to determine where an individual or entity falls on the risk spectrum. At the high end of the spectrum, OIG will pursue exclusion. The OIG named four broad risk categories of factors: (1) Nature and Circumstances of Conduct; (2) Conduct During Investigation; (3) Significant Ameliorative Efforts; and (4) History of Compliance. Some of the highrisk factors that may result in exclusion are summarized below: 

Nature and Circumstances of Conduct: 

(1) Conduct that causes or had the potential to cause an adverse impact to program beneficiaries, recipients, or other patients.

(2) Conduct that is continual, repeated, part of a pattern of wrongdoing, or occurs over a substantial period of time.

(3) Individuals who led or planned the unlawful conduct, or those with managerial or operational control who participated in the conduct 

(4) History of fraud, refusal to enter into a Corporate Integrity Agreement (CIA), previous entrance into a CIA, or breach of a prior CIA.   For additional information regarding the CIA process, please review this article.

Conduct During Investigation:

(1) Obstructing or impeding an audit or investigation. 

(2) Concealing the unlawful conduct from the Government or others. 

(3) Failure to comply with a subpoena within a reasonable time period. 

(4) Adverse licensure action as a result of the conduct or the inability to pay damages, assessments, or penalties to resolve a fraud case. 

History of Compliance:

(1) Absence of a compliance program that incorporates the seven elements of an effective compliance program. 

(2) Existence of a compliance program but no evidence that it was ever followed.

IV.  Exclusion Administrative Procedures: [45]

The OIG can initiate the mandatory exclusion process by sending the party a “Notice of Intent to Exclude” or it can truncate the process by immediately sending a “Notice of Exclusion.” In both processes, the entity is informed of the basis for the proposed exclusion and given an opportunity to respond in writing, but there is no provision for a hearing. While there are limited appeal rights, Mandatory exclusions are not stayed pending the outcome of the appeal. Thus, the OIG immediately posts mandatory exclusions on the LEIE, and it also sends notice of the exclusion to various State and Federal interests including, but not limited to, State licensing boards, medical societies, Medicaid fraud control units, and the National Practitioner Data Bank (NPDB). The permissive exclusion process, unlike the process for mandatory exclusions, provides for discovery and a hearing, and it is stayed pending appeal. 

Exclusions may be appealed to an Administrative Law Judge (ALJ) but they are limited to: whether the OIG had a “basis for the imposition of the sanction;” and, 2) whether the length of the exclusion is unreasonable. Further, the ALJ is prohibited from reviewing either the “exercise of discretion” by the OIG and the underlying factual basis of an exclusion may not be attacked if it was based on a “prior determination” (such as a disciplinary finding). As such, appeals almost never succeed, though appeals as to the length of time are occasionally successful. Denials by the ALJ may be appealed to the Departmental Appeals Board (DAB), and then to a United States District Court. 

V.  Overpayments and Civil Money Penalties:

As we have said, exclusion is the “nuclear bomb” of sanction because any payment made by a Federal health care program for an item or service furnished, ordered, or prescribed, by excluded party is a potential overpayment, and because the OIG may impose Civil Money Penalties (CMPs) against providers that employ or contract with excluded individuals or entities. The payment prohibition, and the resulting employment embargo on excluded entities, are enforced by simply by requiring providers to know the exclusion status of everyone they employ or do business with. A lack of knowledge is no defense as the OIG posts, and monthly updates, a searchable list of all excluded entities on its website (its “List of Excluded Individuals and Entities” (LEIE”)). [46] The only way to ensure the obligation to ensure an exclusion free workforce is to “screen” all employees, vendors and contractors upon hire and monthly thereafter. 

VI.  Exclusion Violations:

In essence, an “exclusion violation” occurs whenever a provider acts in contravention of the “payment prohibition” as defined in 42 C.F.R. § 1001.190. The specific acts which give rise to the OIG’s authority to impose civil money penalties for such violations are listed below:

42 C.F.R. § 1003.200(a)(3) — Knowing presentation of an item or service by an excluded individual or entity 

42 C.F.R. § 1003.200(b)(3) — An excluded party owns or controls 5% or more of an entity, or is an officer or manager.

42 C.F.R. § 1003.200(b)(4) — Employs or contracts with excluded party that he knows, or should know, is excluded.

42 C.F.R. § 1003.200(b)(6) — Orders or prescribes medicine from a person that he knows, or should know, is excluded.

42 C.F.R. § 1003.400(b)(2) — Medicare Contracting Organization (MCO) employs or contracts with an excluded party.

42 C.F.R. § 1003.400(c)(5) — Medicare Advantage or Part D contracting org. employs or contracts with an excluded party.

VII.  Civil Money Penalty Authorities:

The chart below identifies the range of CMPs that can be imposed by the OIG for each type of exclusion violations. In most cases, the OIG has the authority to impose a penalty of up to $10,000 for each individual violation, however, this is increased to $25,000 for violations with respect to Managed Care Organizations, Medicare Advantage Plans and Part D Contractors. [47]

Basis for Civil Money Penalty

Authority for Penalty Amount

    Potential Civil Money Penalty [48]
Presentation of claim for item or service by excluded party. §1003.200(a)(3)
42 C.R.F. §1003.210(a)(1)Up to $10,000 for each individual violation
Excluded party retaining ownership or control. §1003.200(b)(3)45 C.F.R. §1003.210(a)(3)Up to $10,000 per day for each day that the prohibited relationship occurs
Arranges or contracts with an excluded party. §1003.200(b)(4)45 C.F.R. §1003.210(a)(4)Up to $10,000 for each item or service provided or furnished ((separately or non-separately billable)
Orders or prescribes medicine from excluded person. §1003.200(b)(6)45 C.F.R. §1003.210(a)(1)Up to $10,000 for each individual violation
MCO employs or contracts with an excluded party. §1003.400(b)(2)45 C.F.R. §1003.410(a)(1)Up to $25,000 for each individual violation
MA and Part D contracting org. employs or contract with excluded party §1003.400(c)(5)45 C.F.R. §1003.410(a)(1)$25,000 for each individual violation

The bottom line here is simple—a provider cannot employ an individual or entity who has been excluded in practically any capacity without violating the exclusion restrictions. While there is at least one very narrow exception (for certain emergency services), the ban is so complete that it is strongly recommended that providers do not employ or contract with excluded individuals or entities.[49] As the OIG has stated: 

In many instances, the practical effect of an HHS-OIG exclusion is to preclude employment of an excluded individual in any capacity by a health care provider that receives reimbursement, indirectly or directly, from any Federal health care program. [50]

It is not surprising that the OIG focuses on individuals who provide direct care as they are potential risks to both patients and claims, but the variety of the job types that can form the basis of a large penalty is somewhat surprising.

In December 2010, OIG announced that it had assessed significant civil monetary penalties against a health care provider that employed seven individuals who the provider knew or should have knownhad been excluded from participation in Federal health care programs. These individuals were alleged to have furnished items and services for which the provider was paid by Federal health care programs. The provider was required to pay $376,432 to resolve these allegations. As Lewis Morris, Former Chief Counsel to the Office of Inspector General stated:

Providers self-disclosing such violations will ultimately pay lower settlement amounts…But in cases initiated by the government — such as this one — providers will, as a matter of course, be required to pay more to resolve the matter.

As Mr. Morris further noted:

This case illustrates yet again that OIG will pursue CMPs when providers have employed an excluded person for the furnishing of items or services paid for by Federal health care programs.

Notably, this particular matter was referred to OIG for investigation by the state Medicaid Fraud Control Unit (MFCU). OIG continues to use the “knew or should have known” standard for exclusion violations to this day.

CHART OF CMPS

Recent enforcement efforts have also focused on the requirement that providers ensure the exclusion status of physicians, pharmacies and labs at the point of service. In other words, if your practice makes a referral to an excluded therapist, you are as responsible as the therapist for any overpayments! This has resulted in a number of settlements with pharmacies based on the employment of excluded pharmacists or excluded support personnel. A pharmacy chain paid $21.5 million in settlement because it had employed a large number of excluded pharmacists in one case; [52] and in another, the Attorney General of New York settled with a pharmacy for $442,000 to resolve allegations that the pharmacy had been fulfilling prescriptions by an excluded physician.

VIII.  Compliance with Federal Exclusion Screening Requirements: How to Avoid Civil Money Penalties and Overpayment Liability:

In order to avoid the risk of overpayment liability and the imposition of CMPs, providers must screen their employees, vendors and contractors in order to ensure that none are excluded. Much of the content in this section relies on the guidance contained in the 2013 Special Advisory, [53] but it also relies on subsequent guidance issued by the OIG, and on Corporate Integrity Agreements (CIAs) that have been imposed by the OIG as part of recent False Claims Act settlements. [54]

IX.  Screening Employees, Vendors and Contractors:

The OIG recommends the following process for providers to use in determining which employees should be screened: 

[R]eview each job category or contractual relationship to determine whether the item or service being provided is directly or indirectly, in whole or in part, payable by a Federal health care program. If the answer is yes, then the best mechanism for limiting CMP liability is to screen all persons that perform under that contract or that are in that job category. (2013 Special Advisory, at 15-16). 

Unless a provider can identify specific employees that work in separate, identifiable divisions that are wholly unrelated to Federal health care programs, caution dictates against “picking and choosing” who to screen and providers are best served by screening all of their direct employees. Owners, officers, and directors should also be screened. 

With respect to vendors and contractors, the OIG suggests that providers use the same analysis in determining “whether or not to screen contractors, subcontractors, and the employees of contractors” that it uses for its own employee. However, this standard is unrealistic in many circumstances, and providers should focus on those who provide items or services connected to patient care and reimbursement. [55] As the OIG states: 

The CMP authorities in this part, as a general matter, aim to redress fraud on the Federal health care programs by recovering funds, protecting the programs and beneficiaries from untrustworthy providers and suppliers, and deterring improper conduct by others. Accordingly, it is highly relevant if the conduct put beneficiaries at risk of patient harm. [56]

The following contractors and vendors are likely candidates who should be screened: IT providers, ambulance and other transportation service providers, Medical equipment suppliers, food service workers, Lab Technicians, pharmacists, billers and coders, third party billers, staffing agencies and those that they staff. On the other hand, in corporate integrity agreements, the OIG typically excludes from screening vendors whose sole connection to the provider is selling or providing supplies or equipment for which the vendor does not bill. This is a common-sense exception that removes uncertainty with regard to a large class of vendors who provide supplies for which the provider is ultimately reimbursed. The OIG recognizes that some vendors will already be screening, but that proof should be obtained of that activity. The OIG also states that the organization cannot delegate the potential for overpayment liability or CMPs associated with excluded employees. 

Though the OIG concedes that there isn’t a specific regulation as to how often one must screen, it has unequivocally expressed its view providers should screen upon hire and monthly thereafter in to minimize the risk of “potential overpayment and CMP liability.” [57] In addition, the OIG notes that in June, 2008, CMS issued a State Medicaid Director Letter (SMDL #08-003) that provided guidance to Medicaid directors on checking providers and contractors for excluded individuals, [58] and that CMS issued a follow-up directive in 2009 (SMDL #09-001) providing further guidance to the States and, essentially, mandating that screening be done upon hire and monthly thereafter. [59] The OIG also notes that LEIE is updated monthly, and, finally, as a practical matter, removing an excluded employee as soon as possible is the best action a practice can take for business. [60]

The OIG recognizes that providers will sometimes seek to delegate their screening obligation to contractors such as staffing agencies, and in general most providers would benefit from retaining a vendor to perform exclusion screening for them. For most providers it is a cost- effective way of fulfilling their screening obligation and most vendors should agree to screen the various State exclusion lists at little or no additional cost. Having a 3rd party that regularly screens all names can also provide a strong defense as against the imposition of any civil money penalties. [61]

X.  Self-Disclosing Exclusion Violations:

The OIG’s specifically added a new section for self-disclosing exclusion violations when it updated its Self-Disclosure Protocol in May of 2013. [62] The update injected some certainty into the self-disclosure process by providing a simple formula for calculating the “loss” amount where an excluded employee provided non-billable services that contributed to claims – (for example, hospital nurses, administrators, etc.). 

The formula requires providers to (1) calculate the employment costs for the excluded person (including benefits) during the period of employment; (2) determine the provider payor mix; and (3) simply multiply the costs by the Federal percentage of the mix. The result can then be used as a “proxy” for the single damages for “compromising the OIG’s CMP authority,” and since the calculation considers the contribution of the excluded employee during the exclusion period and the extent of the Federal contribution to the organization, it provides a generally proportionate result. [63] However, in matters involving direct billers, the updated protocol does not provide any relief as all submitted claims will be considered overpayments unless a viable defense can be raised. 

XI.  Reinstatement: [64]

Applications may be submitted 90 days prior to the reinstatement date, however, in many permissive exclusions, the reinstatement date is not fixed. For example, if a person is excluded based on a license revocation, he is not eligible for reinstatement until he has regained his license (or an equivalent license in another state); similarly, on OIG Exclusions based on a State health care program exclusion is also linked in length to that action. 42 CFR § 1001.601(b). Once it is determined that a provider is eligible for reinstatement, the OIG will send the provider a number of forms and releases of information to be completed, notarized, and returned. In evaluating reinstatement requests, the OIG considers a number of factors that focus on the risks and benefits to the program and the beneficiaries it serves. 

XII.  Basic Medicaid Exclusion Screening:

In accordance with CMS directives, [65] State Medicaid agencies require enrolled providers to screen their employees and contractors upon hire or when they begin work and monthly thereafter with the OIG’s List of Excluded Individuals and Entities (LEIE) and their own State Exclusion List (if they have one). States agencies can also include additional requirements, and the screening of State specific databases (such as abuse registries) have been added in a number of States. As such, it is very important for compliance officers to check with the rules of the State or States – in which their organization provides Medicaid services. 

In addition to the monthly screening requirement, compliance officers also need to be aware of the expanded requirements that are associated with the enrollment process. 

XIII. Expanded Medicaid Screening Requirements:

Medicaid providers must enroll and re-enroll every 3 5 years (depending on the provider type) in order for the State to determine initial and ongoing eligibility to participate in the program, [66] and as part of the process, providers must disclose their owners (anyone with a 5% interest), officers, directors, agents, managing employees, and any agent of the provider that has contracted with the State Agency. [67] The enrollment and disclosure process is an important part of the overall efforts to ensure that only eligible providers received Medicaid reimbursement, and State Medicaid agencies are specifically authorized to impose screening requirements “in addition to or more stringent than” the ones required by existing regulations. [68]

The implementation of these provisions lies at the heart of the “expanded” screening requirements because most States require, at a minimum, that providers verify and confirm the exclusion status of everyone that is part of their disclosure. This can only be done by screening these persons at the time of enrollment and re-enrollment and considering the breadth of the disclosure,69 this is not an insignificant task. 

As part of the enrollment and disclosure process, a number of States have gone even farther. That is, in addition to the above, a number of States require that providers ensure and verify that none of their employees, vendors and contractors are or ever have been excluded from any Federal or State benefit program! In Texas, for example, prior to enrolling or re-enrolling in Medicaid, providers must conduct an internal review” to confirm that neither the applicant “nor any of its employees, owners, managing partners, or contractors…have been excluded from participation in any program under Title XVIII, XIX, or XXI of the Social Security Act. In addition, providers must certify that they have fulfilled these requirements when signing their enrollment or re-enrollment applications. [70] Similarly, New Jersey requires providers to confirm that none of the providers employees, vendors or contractors have “ever been the subject of any suspension, debarment, disqualification or recovery action involving Medicaid…Medicare… or any other Federally or state-funded health care program.” [71]

XIV. Provider Recommendations:

There are a number of important lessons for health care providers who participate in Federal health benefits programs, regardless of size. These lessons, discussed below, are important as the OIG continues to focus on exclusions. 

  • Screening employees takes time: Screening is a complicated process even for small health care providers. At a minimum, Health care providers and suppliers are required to screen current and prospective employees, as well as any contractors, against the OIG-LEIE and their State Exclusion list (if a Medicaid provider); and depending on your State and your circumstances, your obligation could include several more databases. In addition, your screening requirements associated with enrollment and re-enrollment might be similar to those in Texas and New Jersey and requiring you to check employees and contractors against not only LEIE, but also all other states’ excluded provider lists. The OIG has recognized that providers can choose to contract with another entity to perform their screening, and we recommend it, but in doing so be careful to pick a vendor that gives you confidence that the job has been done well. [72]
  • Proper screening is prudent: In addition to protecting against overpayment and possible civil monetary penalties, the employment or engagement of an excluded party provides additional risks to your patients and the economic well- being of your practice. There is really no good reason to hire or contract with an excluded person or entity. 
  • Regardless of whether there is actual fraud or an overpayment, the employment of excluded individuals is quite serious to the OIG: HHS-OIG won’t hesitate to pursue civil monetary penalties against a provider who employs excluded individuals, despite the fact that no mention is made of any wrongful billings. Regular screenings of employees and contractors should be made to ensure that no employees have been excluded from participation. 
  • The government is serious about self-disclosing problems: To be clear, if you owe money to the government, you must pay it back, and the OIG’s voluntary disclosure protocol was updated to facilitate exclusion disclosures. Thus, the issue to be resolved is not if, but how, to go about returning funds you are not entitled to. Depending on the circumstances, a provider may be better off working with their Medicare Administrative Contractor (MAC) to resolve a problem. In other cases, HHS-OIG’s protocol may be the best option. Every situation is different and should be carefully assessed before action is taken. 
  • Federal and state law enforcement teams are coordinating their actions and findings: We have seen examples of violations being identified by state MFCUs who then contacted the OIG, by Medical Boards who advised a CMS program integrity contractor, and of initiatives by different arms of the OIG. Federal and State coordination is stressed by law enforcement and used to effect. 
  • When entering into contracts, screen your contractors and require that they prove their employees have not been excluded: Rather than focusing solely on employees, look at your contractual business relationships as well, and don’t just take their word! 
  • Ensure that your policy and procedures manual has been updated to include this issue: All employees should be advised that they have an affirmative obligation to tell you if they have been excluded or debarred from a Federal program. 

In summary, practice managers, compliance officers and owners of health care organizations must continually monitor their employees’ exclusion status, not merely check the OIG-LEIE and GSA-SAM lists when an individual is first hired. This compliance task is not the easiest requirement for a compliance officer to meet even for mid and small practices and consideration should be given to engaging a vendor to assist. Further, be aware of all of your screening obligations – State and Federal – and be sure to make screening an integral part of your effective Compliance Program (if it is not already). 

NATIONWIDE REPRESENTATION   Call: 1 (800) 475-1906.

Liles Parker attorneys have extensive knowledge and experience handling OIG exclusion matters and cases. Several of our attorneys held significant positions at DOJ.  In fact, we are the only law firm in the country with two former Federal prosecutors who served as “National Health Care Fraud Coordinator” for the 94 U.S. Attorneys Offices around the country.  We have the skills, knowledge and abilities to help you successfully work through the complicated Medicare exclusion process.  Questions?  For a free consultation, please give us a call:  1 (800) 475-1906.

[1] The authority to exclude was granted to the Secretary of the Department of Health and Human services in the Civil Money Penalties Law (Public Law 97-35, 1981 (as codified at section 1128A of the SSA). The Secretary delegated it to its Office of Inspector General in 1988 (53 Fed. Reg. 12,993 (April 20, 1988)). 

[2] The term “OIG Exclusion” is used as shorthand for an exclusion imposed by the Office of Inspector General pursuant to §1128(a)(1)-(4), (b)(1)-(b)(16) or §1156 of the Social Security Act (SSA). And since Medicare is the largest Federal health care program, the terms “OIG Exclusion” and “Medicare Exclusion” are sometimes used interchangeably. 

[3] The term “Federal health care programs” is defined under Section 1128B(f) of the Social Security Act as: 

(1) any plan or program that provides health benefits, whether directly, through insurance or otherwise, which is funded directly, in whole or in part, by the United States Government (other than the health insurance program under chapter 89 of title 5, United States Code); or 

(2) any State health care program, as defined in section 1128(h). 42 U.S.C. § 1320a-7b(f) (2012). 

[4] 42 C.F.R. § 455.416. (such as exclusions, terminations, debarment and revocations.

[5] The statute speaks in terms of “terminations,” but states refer to such actions under various names including exclusions, terminations, debarment and revocations among others. For the sake of consistency and simplicity, such actions initiated by States will be referred to as “Medicaid Exclusions.” 

[6] See Measuring Compliance Program Effectiveness: A Resource Guide (Jan. 2017). 

[7] Inspector General June Gibbs Brown, in the press release for the 1999 Special Advisory. 

[8] The OIG has twice published guidance of the effect of an OIG Exclusion. A Special Advisory Bulletin on the Effects of Exclusion from Federal Health Care Programs” was issued September 2, 1999 and an “Updated Special Advisory Bulletin on the Effect of Exclusions from Participation in Federal Health Care Programs” was issued May 8, 2013.  

[9] 42 C.F.R. 1001.1901(b), 42 C.F.R. § 1001.10. 

[10] 42 C.F.R. § 1001.10. Definitional changes were made to direct and indirect claims pursuant to rulemaking authority granted to the OIG in the MMA and the ACA; See also, OIG Advisory Opinion No. 18-01 at 5 (Feb. 20, 2018). 

[11] 2013 OIG Special Advisory, at 11-12, 16; see also Advisory Opinion No. 18-01). 

[12] 2013 OIG Special Advisory, at pg. 8. 

[13] 42 CFR 1001.1901(b)(4). 

[14] 42 U.S.C. § 1320a-7(a)(1)-(4). 

[15] See 42 U.S.C. § 1320a-7(a)(1). 

[16] See 42 U.S.C. § 1320a-7(a)(2).  For an interesting case where the OIG recently excluded an individual under this provision, please see our article titled “A Disruptive Conduct Conviction Can Result in a Medicare Exclusion.”

[17] See 42 U.S.C. § 1320a-7(a)(3). 

[18] Which took place after August 21, 1966 (the effective date of HIPAA), see 42 U.S. C. § 1320a-7(a)(4). 

[19] See, §§ 1128(i)(1) – (i)(4) of the Social Security Act. 

[20] Department of Health and Human Service, Departmental Appeals Board Civil Remedies Division, Okwilagwe v. The Inspector General, Docket No. C-13-322, Decision No. CR2920, September 6, 2013 

[21] §1002.230 

[22] These calculations are based on exclusions imposed between 2013 – 2017 as contained in the OIG’s LEIE. 

[23] See 42 U.S.C. § 1320a-7(b)(1). 

[24] See 42 U.S.C. § 1320a-7(b)(2). 

[25] See 42 U.S.C. § 1320a-7(b)(3). 

[26] See 42 U.S.C. § 1320a-7(b)(4). 

[27] See 42 U.S.C. § 1320a-7(b)(5). 

[28] See 42 U.S.C. § 1320a-7(b)(6). 

[29] See 42 U.S.C. § 1320a-7(b)(7). 

[31] See 42 U.S.C. § 1320a–7(b)(8)(B)(ii). 

[32] See 42 U.S.C. § 1320a–7(b)(8)(B)(iii). 

[33] See 42 U.S.C. § 1320a–7(b)(9). 

[34] One example of a required disclosure would include the identity of a sanctioned individual who holds an ownership or control interest in an entity. 

[35] See 42 U.S.C. § 1320a–7(b)(10). 

[36] See 42 U.S.C. § 1320a–7(b)(11). 

[37] See 42 U.S.C. § 1320a–7(b)(12). 

[38] See 42 U.S.C. § 1320a–7(b)(13). 

[39] See 42 U.S.C. § 1320a–7(b)(14). 

[40] See 42 U.S.C. § 1320a–7(b)(15). 

[41] See 42 U.S.C. § 1320a–7(b). 

[42] See U.S. DEP’T OF HEALTH & HUMAN SERVS.: OFFICE OF INSPECTOR GEN., Criteria for Implementing 1128(b)(7) 

Exclusion Authority (Apr. 18, 2016). 

[43] See 62 Fed. Reg. 67,392 (Dec. 24, 1997). 

[44] See U.S. DEP’T OF HEALTH & HUMAN SERVS.: OFFICE OF INSPECTOR GEN., Criteria for Implementing 1128(b)(7) 

Exclusion Authority (Apr. 18, 2016). 

[45] The appeals process is governed by 42 C.F.R. §§ 1001.2001- 1001.2007. 

[46] Which can be found at https://oig.hhs.gov/exclusions/exclusions_list.asp 

[47] This is a listing of the CMP authorities related to exclusion violations. A complete listing of the OIGs CMP authorities can be found on the OIG’s website or at 42 C.F.R. § 1003.210. 

[48] The penalty amounts for CMPs are increased and updated annually and are published at 45 C.F.R. §102. 

[49] OIG provided guidance that explains the circumstances under which an excluded person may be employed by or contract with, a provider and the provider would not be subject to CMP liability: (1) if Federal health care programs do not directly or indirectly pay for the items or services being provided by the excluded individual; and (2) if a provider employs or contracts with an excluded person to furnish items or services solely to non-Federal health care program beneficiaries. See id. at 12. 

[50] Press Release, Department of Health & Human Servs.: Office of Inspector Gen., Special Advisory Bulletin Outlines Effects of Exclusion from Federal Health Care Programs (Sept. 28, 1999) (stating that, “CMPs of up to $10,000 for each item or service furnished by the excluded individual or entity and listed on a claim submitted for Federal program reimbursement, as well as an assessment of up to three times the amount claimed and program exclusion may be imposed”). 

[51] The table cited is intended to be a demonstrative sample of settlements. Exclusion civil money penalty cases are reported and published on the OIG website.  

[52] Cases referenced herein have been reported and published on OIG’s website. 

[53] The updated Bulletin was issued, in part, to provide guidance “on the scope and frequency of screening employees and contractors” See 2013 Special Advisory at 1. 

[54] CIAs are imposed by the OIG in lieu of their imposing administrative remedies in cases involving FCA investigations. As such, requirements in them are sometimes concrete examples of OIG interpretations and expectations and therefore they can be useful as “guidance.” 

[55] See 2013 Updated Special Advisory at 16. 

[56] 81 Fed. Reg. 88, 334 (Dec. 7, 2016). 

[57] 2013 Special Advisory at 15). 

[58] See, https://downloads.cms.gov/cmsgov/archived-downloads/SMDL/downloads/SMD061208.pdf 

[59] See https://downloads.cms.gov/cmsgov/archived-downloads/SMDL/downloads/SMD011609.pdf 

[60] In addition to meeting its regulatory obligations, a proper exclusion screening program can also provide significant benefits to compliance and risk management programs. See HCCA, Measuring Compliance Program Effectiveness: A Resource Guide (Jan. 2017), available at https://oig.hhs.gov/compliance/compliance-resource-portal/files/HCCA-OIG- Resource-Guide.pdf. 

[61] Though it will not provide a defense against overpayment liability. 

[62] See OIG’s Provider Self-Disclosure Protocol (April 17, 2013). 

[63] The result is generally proportionate to the violation because the loss increases in proportion to the employment of the excluded employee, the amount of salary paid to that person and the payor mix of the entity. For example, the loss involving an excluded nursing aide which was discovered soon after hire by a provider with a 25% Federal payor mix would be minimal in comparison to an excluded administrator or management employee who worked for a provider with a 75% Federal payor mix for a period of months or possibly even years before discovery. 

[64] The reinstatement process is found in C.F.R. § 1001.3001 – .3005. 

[65] This is in accordance with CMS directives SMDL 09-001, issued 1/16/09 and SMDL 08-003, issued 6/12/08. Both directives included in Chapter 17 of the Medicaid Program Integrity Manual, issued 9/23/11. Though the Manual is being revised, it is still available on the internet as of 3/11/19, at https://www.cms.gov/Regulations-and- Guidance/Guidance/Manuals/downloads/mpi115c17.pdf 

[66] See, Subpart E- Provider Screening and Enrollment, generally, 42 CFR §§ 455.410, 455.414. 

[67] See, Subpart B – Disclosure of Information by Providers and Fiscal Agents, 42 CFR § 455.100, et seq 

[68] 42 CFR § 455.452 

[69] For example, § 455 defines Managing employee as: a general manager, business manager, administrator, director or other individual who exercises operational or managerial control over or who directly or indirectly conducts the day- to-day operation of an institution organization or agency, § 455. 

[70] See, Texas Administrative Code § 352.5; Texas Medicaid Provider Agreement, Section IX. 

[71] See, New Jersey Provider Agreement. 

[72] See Updated: Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs, U.S. DEPT OF HEALTH & HUMAN SERVS.: OFFICE OF INSPECTOR GEN., at 14 (May 8, 2013).