New Proposed Rules Significantly Expand OIG's Exclusion Power

by Epstein Becker & Green

On May 9, 2014, the Office of Inspector General ("OIG") of the Department of Health and Human Services published in the Federal Register a proposed rule amending the regulations relating to OIG's exclusion authority (hereinafter the "Proposed Exclusion Rule"). With the Proposed Exclusion Rule, OIG intends to update its exclusion regulations to codify changes made by Affordable Care Act ("ACA"); the Medicare Prescription Drug, Improvement, and Modernization Act of 2003; and other statutory authorities. Among many technical changes to clarify and update the existing exclusion regulations, the Proposed Exclusion Rule codifies the new permissive exclusion authority established in the ACA and also modifies the aggravating and mitigating factors that OIG uses to determine the length of exclusion, establishes OIG's testimonial subpoena authority in exclusion cases, and modifies the reinstatement rules for individuals who have been excluded due to loss of license. Public comments to the Proposed Exclusion Rule are due by July 8, 2014.

Three days after issuing the Proposed Exclusion Rule, on May 12, 2014, OIG published proposed amendments to the OIG civil monetary penalty ("CMP") rules (hereinafter the "Proposed CMP Rule"). (The Civil Monetary Penalty Law authorizes OIG to exclude persons from federal health care programs.) The Proposed CMP Rule would incorporate new CMP authorities, clarify existing authorities, and reorganize regulations on CMPs, assessments, and exclusions. Public comments to the Proposed CMP Rule are due by July 11, 2014.

OIG's exclusion authorities are intended to protect federal health care programs and their beneficiaries from untrustworthy health care providers, i.e., individuals and entities that pose a risk to program beneficiaries or to the integrity of these programs. These authorities encompass both mandatory exclusions and permissive exclusions. The mandatory exclusion authorities require OIG to exclude from federal health care program participation any individual or entity convicted of a "program-related" crime; a crime related to patient abuse or neglect; or certain felonies related to health care delivery, governmental health care programs, or controlled substances. Mandatory exclusions are for a period of at least five years. The permissive authorities do not require the imposition of an exclusion and may either be (1) "derivative" exclusions that are based on actions previously taken by a court or other law enforcement or regulatory agency, or (2) "affirmative" exclusions that are based on OIG-initiated determinations of misconduct, e.g., poor quality of care, kickbacks, or submission of false claims to a federal health care program. While there is no five-year minimum term for permissive exclusions, some permissive authorities have varying minimum or benchmark exclusion terms. In fiscal year ("FY") 2013 alone, OIG excluded 3,214 individuals and entities from participation in federal health care programs. Significantly, this is 20 percent more than the number of entities and individuals excluded in FY 2011.

Below are several highlights from the proposed rules:

The Proposed Exclusion Rule:

  1. No Time Limit on Affirmative Exclusions

Most notably, the Proposed Exclusion Rule would provide that there is no time limitation to exclusions, even when the exclusion is based on violations of another statute that might have a specific limitations period. This represents a significant policy shift on the part of OIG as OIG declined to finalize a similar proposed regulation in 2002.

  1. Permissive Exclusion for Failure to Supply Payment Information Is Now Applicable to More Individuals and Entities

Section 6406(c) of the ACA broadened the scope of the permissive exclusion for failing to supply certain payment information. With this change, the exclusion applies not only to individuals or entities that "furnish items or services for which payment may be made" under Medicare or a state health care program, but also to individuals or entities that order such items, refer such items for furnishing, or certify the need for such items. The Proposed Exclusion Rule revises 42 C.F.R. § 1001.201 to reflect this expanded authority.

  1. Obstruction of Audits as a New Basis for Exclusion

Section 6408(c) of the ACA also expanded OIG's exclusion authority by allowing OIG to exclude an individual or entity that has been convicted of an offense in connection with the obstruction of an investigation or audit related to any criminal offense: (1) under any of the mandatory exclusion authorities; (2) under the permissive exclusion authority related to health care fraud or fraud in a governmental program; or (3) in cases when the investigation or audit related to the use of federal health care program funds received, directly or indirectly. The Proposed Exclusion Rule revises 42 C.F.R. § 1001.301 to reflect this new authority.

  1. Establishment of a New Permissive Exclusion Authority

The Proposed Exclusion Rule codifies § 6402(d) of the ACA, which provides that OIG may exclude 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.

  1. Aggravating and Mitigating Factor Changes

The Proposed Exclusion Rule increases the financial loss aggravating factor to $15,000 and removes the aggravating factor related to overpayments (42 C.F.R. § 1001.102(b)(7)) because it is duplicative of § 1001.102(b)(1), which provides for an increase in the exclusion period for causing a financial loss to a government program. The Proposed Exclusion Rule also removes the mitigating factor for determining the length of exclusion under various permissive exclusion authorities that considers whether alternative sources of the type of health care items services furnished by the individual are not available. OIG determined this factor should be considered in deciding whether a permissive exclusion should be imposed, not how long the exclusion should be.

  1. Exclusion of Individuals with Ownership Control Interest in Sanctioned Entities

The Proposed Exclusion Rule clarifies the circumstances pertaining to the length of an exclusion imposed on individuals with ownership or control interests in sanctioned entities by stating that the length of the individual's exclusion will be for the same period as that of the sanctioned entity with which the individual has or had the prohibited relationship. The proposed change would clarify that, if an individual terminated the relationship with the sanctioned entity after it has been excluded, the individual would nonetheless remain excluded for the same period that the sanctioned entity is excluded.

  1. Testimonial Subpoena Authority

The Proposed Exclusion Rule codifies § 6402(e) of the ACA, which granted OIG testimonial subpoena authority in investigations of potential cases involving the exclusion statute.

  1. Reinstatement

Finally, the Proposed Exclusion Rule modifies the reinstatement rules. Section 1128(b)(4) of the Social Security Act permits OIG to exclude individuals from participation in all federal health care programs because of the loss of their health care licenses for reasons bearing on their professional competence, professional performance, or financial integrity. The Proposed Exclusion Rule would allow an individual excluded on this basis to request early reinstatement if, after fully and accurately disclosing the circumstances surrounding the original license action that formed the basis for the exclusion, the individual obtained a health care license, was allowed to retain a health care license in another state, or retained a different health care license in the same state. The Proposed Exclusion Rule would also allow an excluded individual to request early reinstatement if he or she did not have a valid health care license of any kind, provided that the individual could demonstrate that he or she would no longer pose a threat to federal health care programs and their beneficiaries.

  1. Prescriptions and Subsequently Excluded Providers

OIG is also specifically soliciting comments in regard to how it might craft a regulation that addresses the limited situation when an enrollee whose prescription was written by a physician who was subsequently excluded may urgently need a prescription refill (for example, for blood pressure medication or insulin) and may be unable to see another physician quickly. OIG expressed concern that the resulting delay in getting medication could pose a risk to the enrollee's health.

The Proposed CMP Rule:

  1. New CMP Exclusions

The Proposed CMP Rule incorporates several provisions from the ACA that provide for CMPs, assessments, and exclusions for: (1) failing to grant OIG timely access to records; (2) ordering or prescribing while excluded; (3) making false statements, omissions, or misrepresentations in an enrollment application; (4) failing to report and return an overpayment; and (5) making or using a false record or statement that is material to a false or fraudulent claim.

  1. Consolidation of Aggravating and Mitigating Factors for CMP Exclusions

In the Proposed CMP Rule, OIG proposes modifying the provisions relating to the factors considered in determining the exclusion period. OIG identified the most common issues among the factors listed and created a single, primary list of factors that include: (1) the nature and circumstances of the violation, (2) the degree of culpability of the person, (3) the history of prior offenses, (4) other wrongful conduct, and (5) other matters, as justice may require.

  1. New Methodology for Calculating Penalties for Arranging or Contracting with Excluded Individuals Who Provide Non-Separately Billable Items or Services

The CMP Law currently subjects a person to liability for arranging or contracting with (by employment or otherwise) another person whom he or she knows or should know is excluded from participation in a federal health care program for the provision of items or services for which payment may be made under that program. OIG recognized that, in light of new bundled payment systems, the involvement of a single excluded person could cause the total bundled claim or prospective payment to be prohibited, which would not be an appropriate penalty.

In light of this, in the Proposed CMP Rule, OIG now provides two separate methodologies for calculating penalties and assessments: one in situations where excluded individuals provide "separately billable item or services," and another in situations where individuals provide "non-separately-billable item or services." In instances when the item or service provided by the excluded person is separately billable, the employing or contracting person would continue to be subject to penalties and assessments based on the number and value of those separately billable items and services. However, for instances when the item or service provided by the excluded person is non-separately billable, penalties would be based on the number of days that the excluded person was employed, was contracted with, or otherwise arranged to provide non-separately-billable items or services. Assessments would be based on the total costs to the employer or contractor of employing or contracting with the excluded person during the exclusion, including salary, benefits, and other money or items of value.

  1. Exclusions for On-Call Physicians Who Violate EMTALA

"Responsible physicians" are currently subject to exclusion for committing a gross and flagrant or repeated violation of their Emergency Medical Treatment and Active Labor Act ("EMTALA") obligations. In the Proposed CMP Rule, OIG clarifies that on-call physicians at any participating hospital subject to EMTALA are considered "responsible physicians" and face potential CMP exclusion liability. OIG also removed the mitigating factors for exclusion as a result of EMTALA violations and revised the factors to clarify that aggravating circumstances include: (1) a request for proof of insurance or payment prior to screening or treating; (2) patient harm, unnecessary risk of patient harm, premature discharge, or a need for additional services or subsequent hospital admission that resulted, or could have resulted, from the incident; and (3) whether the individual is presented with a medical condition that was an emergency medical condition.

Key Takeaways

The health care and life sciences industries can expect that OIG, with its broader exclusion power, will continue its recent trend to exclude more individuals and entities from federal health care programs. In light of this, individuals and entities that participate in federal health care programs should do the following:

  • Be cognizant of the increasing number of means by which OIG may impose exclusions.
  • Ensure that payment information is provided in a timely manner to regulatory authorities, when requested.
  • Assist regulatory authorities with access to information if an audit occurs.
  • Ensure that on-call physicians are familiar with the requirements of EMTALA.

IRS Circular 230 Disclosure

To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of: (i) avoiding any tax penalty, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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