The Department of Health and Human Services, Office of Inspector General (OIG) published a final rule on January 12, 2017, expanding the OIG’s authority to exclude providers from participation in federal healthcare programs. The final rule adds to the OIG’s already substantial arsenal of grounds for exclusion and also makes the exclusion process easier for the OIG under certain circumstances. Much of the final rule implements changes to the Secretary’s exclusionary authority granted under the Affordable Care Act (ACA). The final rule was scheduled to go into effect February 13, 2017; however, the final rule is among those pending regulations subject to a regulatory freeze and review ordered by the White House in a January 20, 2017 memorandum to the heads of executive departments and agencies.  As a result, the effective date of the final rule is unclear at this time.

10-Year Statute of Limitations

Unlike the proposed rule, which provided the OIG an unlimited amount of time to bring exclusion actions under the False Claims Act (FCA) and Anti-Kickback Statute (AKS), the final rule imposes a 10-year statute of limitations. Although the OIG acknowledged that a statute of limitations should apply, the OIG reasoned that a long statute of limitations is necessary to avoid qui tam lawsuits and exclusion actions moving on parallel tracks, which may waste administrative and judicial resources. The OIG set the 10-year limitation period in hopes that FCA cases, to which most FCA exclusion actions are related, would result in a judgment or settlement before the OIG must determine whether to seek exclusion.

Obstruction of Audits

Under the final rule, the OIG has permissive authority to exclude providers convicted under federal or state law of obstructing government audits. In response to criticism that audits should not be treated like formal investigations, the OIG stated that audits are formal in nature and emphasized the role of providers’ compliance in preventing and detecting fraud.

Ownership or Control Interest in an Excluded Entity

The OIG may exclude providers holding an ownership or control interest in an excluded entity, regardless of whether the individual holding the ownership or control interest terminates his or her relationship with the entity prior to the individual’s exclusion. The final rule confirmed that the individual’s exclusion will run for the same period as that of the excluded entity. In addressing concerns that an individual holding an ownership or control interest may not have a level of knowledge of wrongdoing warranting a lengthy exclusion, the OIG asserted that it needs the authority to exclude untrustworthy individuals and stated that the permissive nature of its authority will ensure that such authority is exercised only when appropriate. 

Failure to Provide Payment Information

The final rule expanded the OIG’s reach to providers referring, furnishing, ordering, or certifying the need for items or services payable under Medicare or a state healthcare program, where such providers fail to supply payment information in response to government requests. This exclusion authority was previously limited to any individual or entity who “furnishes items or services.” Commenters worried that a provider referring or certifying the need for items and services may be unfairly excluded if the provider is unaware that the patient benefitting from the items or services is a federal healthcare program beneficiary. The OIG dismissed this concern, noting that when a provider is excluded for failure to provide requested information to the government, the provider’s knowledge of a patient’s beneficiary status is irrelevant.

False Statements or Misrepresentations of Material Facts

The final rule also implements an ACA provision permitting exclusion when a provider makes a false statement or misrepresentation in a provider’s application under a federal healthcare program, such as in the Medicare enrollment process. The OIG’s authority to exclude providers who knowingly make or cause to be made false statements, omissions, or misrepresentations of material fact is based on a definition of materiality that does not require reliance on the false statement or misrepresentation. Consistent with the FCA definition of the term, the final rule defines “material” as having a “natural tendency to influence or be capable of influencing” the government’s decision regarding a participation or enrollment request. In rejecting suggested alternative factors for determining the length of exclusion for a false statement or misrepresentation, the OIG stated that it will focus only on relevant past behavior, the potential impact of the false statement or misrepresentation, and the egregiousness of the provider’s conduct.

Increase in Financial Loss Aggravating Factor

For mandatory exclusions and certain permissive exclusions, the OIG increased the amount of the financial loss aggravating factor used to determine the length of an exclusion from $5,000 to $50,000. The OIG initially proposed an increase to only $15,000 but landed on a larger increase in response to comments that $15,000 is a relatively low amount that would encompass most exclusions, and thus would not help the OIG measure a provider’s lack of trustworthiness.

Rejection of Narrowed Exclusions for Controlled Substances

The final rule does not implement a previously proposed provision concerning exclusions based on convictions related to controlled substances. The proposed rule would have limited the scope of providers excluded for convictions related to controlled substances to providers whose convictions were based on actions occurring while the individual worked in the healthcare industry. The OIG agreed with a comment that narrowing this class of excluded individuals would fail to protect beneficiaries from providers who left the healthcare field before committing the offense involving controlled substances and then re-entered the field after the provider’s conviction.

Termination of Notice of Intent Letters

The final rule discontinues notice of intent letters for exclusions resulting from FCA and AKS violations. The OIG explained that letters providing notice of a proposal to exclude ensure adequate notice and that this change resolves any ambiguity regarding the date an exclusion takes effect. An exclusion related to the FCA or AKS goes into effect 60 days after the notice of proposal to exclude unless the provider appeals the exclusion during this time period.

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The final rule significantly expands the OIG’s already expansive permissive exclusion authority.  Healthcare providers should take the issuance of the final rule as an opportunity to revisit their compliance policies and training programs. In particular, providers should ensure that staff and those integral to the compliance process are prepared to quickly and accurately respond to government requests for information.