OIG's Proposed Rule to Expand Civil Monetary Penalties

by Foley & Lardner LLP

The Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) on May 12, 2014 published a proposed rule (Proposed Rule) that would implement the OIG’s expanded authority under the Affordable Care Act (ACA) to impose Civil Monetary Penalties (CMPs) on providers and suppliers for “false and fraudulent claims and other similar misconduct.” (see Proposed Rule). The Proposed Rule also revises and reorganizes the OIG’s existing regulations to improve clarity and to reflect OIG’s now extensive experience with CMPs, including new provisions relating to mitigating and aggravating factors to be considered in determining the amount of a CMP. The OIG estimates that the Proposed Rule would increase the government’s CMP collections, which have ranged from $10.2 million to $26.2 million per year over the past decade. Comments on the Proposed Rule are due by July 11, 2014.

The Proposed Rule sets forth how OIG proposes to assess significant CMPs for a broader scope of conduct, as set forth in the ACA, and proposes penalties in the following amounts:

  • Failing to report and return an identified overpayment in accordance with the 60-day refund rule established by the ACA ($10,000 per day for each overpayment);
  • Failing to grant OIG timely access to records, upon reasonable request (up to $15,000 per day);
  • Ordering or prescribing items or services while excluded from participation in federal health care programs ($10,000 per violation);
  • Making false statements, omissions, or misrepresentations in an enrollment or similar application to participate in a federal health care programs ($50,000 for each false statement, omission, or misrepresentation); and
  • Making or using a false record or statement that is material to a false or fraudulent claim ($50,000 for each false record or statement).

Of particular concern for providers and suppliers is the CMP proposal relating to a failure to comply with the 60-day refund rule. As noted above, the proposal is for a $10,000 CMP per each overdue day for each overpayment. The ACA did not specify a per day penalty, but instead provided for imposition of the default penalty amount in the Civil Money Penalty Law—which allows up to $10,000 for each item or service. The government is proposing that this $10,000 maximum CMP be imposed per day for each overpayment. OIG is expressly soliciting comments on whether to interpret the penalty as a per item or service penalty, up to $10,000 for each item or service for which the provider or supplier has identified an overpayment but not reported and refunded the overpayment, or a per day penalty. While tracking the overpayment definition included in the ACA, the Proposed Rule does not clarify when an overpayment is “identified.” The Centers for Medicare and Medicaid Services (CMS), which has delegated authority for overpayment determinations and collections (but not the CMPs discussed here), has not yet finalized regulations which would have provided its interpretation of when an overpayment would be considered to be “identified” (see, Health Care Law Today’s previous post, Medicare’s 60-Day Proposed Refund Rule Imposes Significant Liability on Providers). Clarification of the critical issues relating to the 60-day refund rule (such as the definition of “identified”) is of particular importance to providers and suppliers given the potential False Claims Act liability for failure to timely report and return overpayments.

Outside the scope of this discussion are other provisions of the Proposed Rule which include revisions to CMP authorities applicable to drug manufacturers who have price reporting obligations, managed care organizations, and those who sell Medicare Supplemental Policies. In addition to the provisions discussed above, the Proposed Rule includes additional revisions to existing CMP regulations applicable to providers and suppliers, including the CMPs for hiring or contracting with excluded individuals. How the Proposed Rule is ultimately finalized will recalibrate OIG’s use of CMPs as a key component of its administrative enforcement efforts.

This Proposed Rule is one component of a more comprehensive rulemaking agenda by OIG related to Medicare fraud and abuse. OIG contemplates additional rulemaking in the following areas: exclusion authorities (42 CFR parts 1000, 1001, 1002, 1006, 1007); inflation adjustment for CMPs (42 CFR part 1003); and safe harbors under the anti-kickback statute, a revised definition of remuneration in part 1003, and a codified gainsharing CMP (42 CFR 1001.952, 42 CFR part 1003). Collectively, these rules will expand and further clarify OIG’s enforcement authority.

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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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