On April 21, 2020, the U.S. Department of Health and Human Services (HHS), Office of Inspector General (HHS-OIG) issued a Proposed Rule to amend the agency’s civil monetary penalty (CMP) rules.
The Proposed Rule addresses three topics:
- The amendment of the Civil Monetary Penalties Law (CMPL), 42 U.S.C. § 1320a-7a, by the 21st Century Cures Act (Cures Act), authorizing HHS to “impose CMPs, assessments, and exclusions upon individuals and entities that engage in fraud and other misconduct related to HHS grants, contracts, and other agreements.”
- The amendment of the Public Health Service Act (PHSA), 42 U.S.C. § 300jj-52, by the Cures Act, authorizing HHS-OIG to “investigate claims of information blocking” and providing the Secretary of HHS (Secretary) authority to "impose CMPs for information blocking.”
- The increase in penalty amounts under the CMPL, effected by the Bipartisan Budget Act of 2018 (BBA 2018).
This alert focuses on the first and third topics above. In the coming days, we will be issuing a separate alert on the Proposed Rule’s second topic, regarding investigation of, and CMP authority for, information blocking.
CMP Authority for Fraud and Other Misconduct involving HHS Grants, Contracts, and Other Agreements
Under the CMPL, HHS may impose CMPs, assessments, and exclusions on individuals and entities engaging in fraud or other misconduct related to Federal health care programs. The Cures Act amended the CMPL to expand this authority, authorizing HHS-OIG to impose CMPs, assessments, and exclusions with respect to HHS grants, contracts, and other agreements. The Proposed Rule would modify HHS’s CMP regulations (found at 42 C.F.R. Parts 1003 and 1005) to reflect this expanded authority and to clarify its scope.
Cures Act Amendments
The Cures Act amended the CMPL to expand HHS’s enforcement authority, authorizing HHS-OIG to impose CMPs, assessments, and exclusions upon any person who, with respect to a “grant, contract, or other agreement for which the Secretary provides funding”:
- “knowingly presents or causes to be presented a specified claim… under such grant, contract, or other agreement that the person knows or should know is false or fraudulent”;
- “knowingly makes, uses, or causes to be made or used, any false statement, omission, or misrepresentation of a material fact in any application, proposal, bid, progress report, or other document that is required to be submitted in order to directly or indirectly receive or retain funds provided in whole or in part by such Secretary pursuant to such grant, contract, or other agreement”;
- “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent specified claim under such grant, contract, or other agreement”;
- “knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation… to pay or transmit funds or property to such Secretary… or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit funds or property to such Secretary with respect to such grant, contract, or other agreement”; or
- “fails to grant timely access, upon reasonable request” to HHS-OIG personnel “for the purpose of audits, investigations, evaluations, or other [HHS-OIG] statutory functions” related to HHS “grants, contracts, or other agreements.”
For purposes of the first and third offenses listed above, the Cures Act defines a “specified claim” as “any application, request, or demand under a grant, contract, or other agreement” that is not a claim for payment for items and services under a Federal health care program and that is (i) “presented or caused to be presented to an officer, employee, or agent of [HHS] or agency thereof, or of any specified State agency,” or (ii) “made to a contractor, grantee, or other recipient if the money or property is to be spent or used on [HHS’s] behalf or to advance [an HHS] program or interest” and if HHS (A) “[p]rovides or has provided any portion of the money or property requested or demanded” or (B) “[w]ill reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded.” The Cures Act states that a “recipient” includes a “subrecipient or subcontractor.”
Pursuant to the Cures Act, HHS-OIG may impose a maximum CMP of $10,000 to $50,000 per offense, depending on the specified offense listed above. Additionally, for some of the specified offenses, HHS-OIG may impose an assessment of not more than three times the amount involved with the improper conduct.
Consistent with the Cures Act amendments, the Proposed Rule would adopt the five categories of new offenses in their entirety, including the specified penalties for each offense. The Proposed Rule also would provide the following clarifications regarding HHS-OIG’s authority with respect to HHS grants, contracts, or other agreements:
- Broad Definition of “Recipient.” For purposes of the CMPL offenses described above involving “specified claims,” the Proposed Rule defines a “recipient” as “any person” (excluding a program beneficiary) “directly or indirectly receiving money or property under a grant, contract, or other agreement funded in whole or in part by the Secretary, including a subrecipient or subcontractor.” HHS-OIG makes it clear that this would mean that HHS would be authorized to impose penalties, assessments, or exclusions against “any individual or entity that commits acts in its interactions with these recipients” in a manner that violates the CMPL. Put differently, the Proposed Rule would appear to allow HHS-OIG to impose CMPs on any individual or entity in the chain of funding, assuming the requisite offense elements are met.
- Other Definitions. The Proposed Rule adopts many of the statutory definitions in their entirety and without change. Though HHS-OIG does not propose any changes to these terms, it is important to note the breadth of some of these definitions. For instance, the Cures Act defines the term “other agreement” using a non-exclusive list of examples, such as cooperative agreements, loans, subsidies, and payments for a specified use. HHS-OIG does not provide further specificity in the Proposed Rule with respect to how it will apply this definition in investigating potential misconduct, but instead notes that it “will evaluate each matter on a case-by-case basis to determine whether the funding arrangement” constitutes an “other agreement.”
- Determination of CMP, Assessment, or Period of Exclusion. Current regulations provide several factors HHS-OIG will consider in determining the appropriate CMP, assessment, or period of exclusion. Under the Proposed Rule, HHS-OIG would also consider additional aggravating and mitigating factors in imposing sanctions relating to HHS grants, contracts, or other agreements. These factors “largely mirror[ ] the list of circumstances” in 42 C.F.R. § 1003.220 — which HHS-OIG utilizes to impose sanctions related to fraudulent or false submissions of healthcare claims — and include, for instance, the number of violations and the total amount claimed or requested related to the violation. HHS-OIG solicits comments on other aggravating or mitigating circumstances it should consider.
- Appeals and Other Procedural Rights. HHS-OIG proposes to give individuals and entities sanctioned for fraud and other misconduct related to HHS grants, contracts, or other agreements the same procedural and appeal rights that exist for those sanctioned under the CMPL and other statutes for fraud or misconduct.
While the Proposed Rule does not explicitly address the CARES Act, it should be noted that the Proposed Rule may have significant implications for funding provided by HHS under the CARES Act or other funding provided by HHS in connection with the COVID-19 public health emergency. For example, in the initial disbursement of the CARES Act Provider Relief Fund, HHS delivered $30 billion to eligible providers. HHS conditioned the payment on the provider signing an attestation accepting the Terms and Conditions, which require the provider to submit a quarterly report accounting for use of the funds. Based on the Proposed Rule, it would appear that HHS-OIG potentially could impose a CMP, assessment, and exclusion on a provider who “knowingly makes, uses, or causes to be made or used, any false statement, omission, or misrepresentation of a material fact” in the required quarterly report for the CARES Act Provider Relief Fund. Therefore, as we have recently advised in the False Claims Act context, providers should be diligent in understanding the statutory and regulatory requirements associated with the receipt and use of such funding.
BBA 2018 Increase to CMPL Penalty Amounts
In addition to addressing amendments to the CMPL made by the Cures Act, the Proposed Rule also addresses amendments made to the CMPL by BBA 2018. Effective February 9, 2018, BBA 2018 increased the maximum CMPs pertaining to (i) improperly filed claims for items and services under a Federal health care program (from $10,000 to $20,000, from $15,000 to $30,000, and from $50,000 to $100,000, depending on the specific offense) and (ii) payments to induce a reduction or limitation of services (from $2,000 to $5,000 and from $5,000 to $10,000, depending on the specific offense). The Proposed Rule would update HHS-OIG’s CMP regulations (found at 42 C.F.R. Part 1003) to reflect these increased penalty amounts.