On January 12, 2017, the Department of Health and Human Services’ Office of Inspector General (OIG) published a final rule expanding its authority to exclude providers from participation in federal healthcare programs. This final rule – much of which merely implements authority granted to OIG under the Affordable Care Act (ACA) – adds to the numerous rationales for both mandatory and permissive exclusions. Importantly, however, the final rule also promulgates regulations favorable to providers, including changes relating to the length of exclusions, as well as the implementation of a standard by which OIG may consider early reinstatement.

These regulations were set to go into effect on February 13, 2017. However, the pending regulatory freeze and review issued by the Trump administration has created some uncertainty about the effective date.

A. 10-Year Statute of Limitations

When initially proposing these exclusion-expanding regulations, the OIG sought to clarify and codify that its exclusion authority under section 1128(b)(7) of the Social Security Act did not provide a time limitation for excluding a provider from federal healthcare programs. This proposal was based in part in the interaction of section 1128 with the False Claims Act (FCA), which serves as the government’s “primary civil remedy for health care fraud.” Because “[a]lmost every Federal health care program fraud actionable under the FCA can also form the basis for exclusion under section 1128(b)(7),” the OIG “closely coordinates” with the Department of Justice, the enforcement agency tasked with litigating claims brought under the FCA, to consider and resolve exclusions in conjunction with FCA settlements. For that reason, the OIG was hesitant to set a limitations period for exclusions for fear that it would be forced “to either initiate administrative proceedings while the FCA matter is proceeding or lose the ability to protect the programs and beneficiaries through an exclusion.” Moreover, the OIG feared wasting both government and private resources if it had to litigate FCA and exclusion actions on “parallel tracks.”

However, in response to numerous commenters, the OIG decided to adopt a 10-year statute of limitations period for exclusions relating to the FCA or Anti-Kickback Statute (AKS) violations. The final rule notes that, because the FCA allows the filing of an action for up to 10 years after the underlying conduct, this 10-year limitations period for exclusion “will better align the resolution of FCA and section 1128(b)(7) remedies.” Indeed,

[i]n litigated FCA cases, OIG is in the best position to consider exclusion after there is a judgment, which will either provide a strong basis for exclusion (if the judgment is in favor of the Government) or make an exclusion case difficult or impossible (if the judgment is in favor of the defendant). When a case settles, OIG can consider all the relevant factors, including the defendant’s willingness to agree to appropriate compliance terms, when determining whether to seek exclusion. A longer limitations period will better allow OIG to consider all of the relevant factors before making an exclusion decisions and expand the number of cases in which resolution of an FCA mater will not occur after OIG’s period of limitations has ended.

Thus, by tying the limitations period of its exclusionary authority to the FCA’s limitations period, the OIG effectively reduced the risk of litigating an exclusion action while FCA litigation is pending.

B. New Permissive Exclusion Authorities

Pursuant (and in addition) to the ACA’s statutory expansions of OIG’s exclusion authority, the final rule codified OIG’s ability to exclude based on the following:

• Convictions relating to the obstruction of a government audit, including Medicare surveys or certification processes;
• A provider’s failure to provide payment information, including by individuals who “order, refer for furnishing, or certify the need for” items or services paid for by a federal or state health care program; and
• Making false statements or misrepresenting material facts in provider or supplier application, agreement, bid, or contract to participate or enroll in a federal health care program.

C. Financial Loss Aggravating Factors

OIG regulations provide for a number of aggravating and mitigating factors that OIG may consider in determining the length of both mandatory and permissive exclusions. For example, although mandatory exclusions must be at least five years in length, the OIG previously had the ability to increase the length of the mandatory exclusion if the acts resulting in the provider’s conviction resulted in an actual or intended financial loss to the government of $5,000 or more. The same was true for permissive exclusions based on misdemeanor convictions relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct. Likewise, for permissive exclusions relating to the submission of requests for payment from federal health care programs “substantially in excess” of the provider’s usual charges or for medically unnecessary services, OIG could consider, inter alia, an actual or intended loss amount of $1,500 in determining whether to lengthen the exclusion period. Moreover, permissive exclusions relating to convictions under federal or state law in connection with the obstruction of an investigation relating to criminal health care fraud had no dollar amount tied to its aggravating factors.

Noting that “the purpose of the aggravating factor is to provide for an additional period of exclusion for those cases that involve high losses relative to other cases,” OIG concluded: “[i]n the current health care fraud environment, the $5,000 and $1,500 financial aggravating factor thresholds do not reflect unusual or relatively high losses.” As such, OIG increased these thresholds to $50,000 and $15,000, respectively, and added a $50,000 threshold to the list of aggravating factors for exclusions relating to convictions for obstruction.

D. Removing the Alternative Sources Mitigating Factor

The final rule removes the mitigating factor previously found throughout OIG’s exclusion regulations which considered whether alternative sources of health care are available. As such, OIG will no longer consider alternative sources in determining the length of exclusion. Although commenters suggested that removing this consideration as a mitigating factor could impair access to care, OIG explained that because exclusion can have an impact on access to care as soon as it takes effect, “it is more appropriate to consider whether exclusion will impact access to care in determining whether to impose a permissive exclusion rather than to determine the length of exclusion.” OIG still intends to allow providers an opportunity to present information relating to potential access to care issues prior to exclusion.

E. Consideration of Early Reinstatement

For individuals or entities excluded pursuant to 42 C.F.R. § 1001.501 – which grants the OIG authority to exclude providers who have had their licensure revoked or suspended by a state licensing agency – the final rule implements conditions under which OIG will consider reinstatement. Specifically, if the individual or entity re-obtains licensure in the state where the license was originally revoked, suspended, surrendered, or otherwise lost, OIG will consider a request for reinstatement. However, even if the provider has not yet had its license reinstated by the state agency that took the action leading to OIG exclusion, OIG will still consider requests for early reinstatement if the licensing authority of a different state, or a different licensing authority in the same state, grants licensure to the excluded provider. In making such considerations, OIG will look to various factors, such as “[w]hether the second licensing authority is in a state that is not the individual’s primary place of practice.” Importantly, however, OIG’s consideration of such a reinstatement request assumes that the provider has fully disclosed “the circumstances surrounding the action that formed the basis for the exclusion” to the second licensing authority.

Additionally, for individuals without any health care licenses seeking reinstatement under § 1001.501, the final rule changes the presumption against reinstatement from five years to three years. In doing so, OIG noted that “the intent behind early reinstatement is to address situations in which an individual may not be precluded by the licensing board from trying to re-obtain the lost license but is choosing (because of practicality, financial resources, lack of interest, etc.) not to attempt to regain the license.”

F. Ownership and Control Interests

The final rule adds provisions relating both to the “exclusion of entities owned or controlled by a sanctioned person,” as well as the “exclusion of individuals with ownership or control interest in sanctioned entities.” First, the final rule permits OIG to exclude entities under circumstances where a person with a direct or indirect ownership or control interest, or who formerly held an ownership or control interest, in the entity has been convicted, assessed a civil monetary penalty (CMP), or excluded from participation in Medicare or any State health care program. This includes situations “in which a person transfers his or her ownership or control interest to an immediate family member or a member of the person’s household in anticipation of a conviction, [CMP], or exclusion.”

Moreover, OIG may exclude an individual holding an ownership or control interest in an excluded entity, regardless of whether such individual terminates his or her relationship with the entity prior to the entity’s exclusion. With regard to the length of such exclusion, the final rule provides that the individual’s exclusion period will run concurrently with that of the sanctioned entity.

Conclusion

With this new final rule, OIG expands upon its already expansive exclusionary authority. As such, we recommend that providers familiarize themselves with these new rules in order avoid potential sanctions.