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Highlights of the OIG Expanded Exclusion Authority

Highlights of the OIG Expanded Exclusion Authority

Health Care Law Note
(February 10, 2017)

Exclusion has long been one of the most potent tools in the arsenal of the federal Department of Health and Human Services, Office of Inspector General (OIG).  Excluded individuals and entities cannot receive reimbursement for any services provided to federal program beneficiaries, and a non-excluded provider that hires or contracts with an excluded individual or entity is subject to paybacks and penalties.  While in some instances of fraud the OIG is required to exclude the individual or entity found guilty of fraudulent conduct, in other instances the OIG can exercise what is known as “permissive” exclusion.  Since December 2016 alone, the OIG has imposed exclusion periods of thirty to fifty years against a dentist, a nursing home and its individual owner, and a chiropractor and his two chiropractic practices.

Thanks to recent changes to the OIG’s exclusion authority, the OIG now has more power than ever to exclude individuals and entities found to be in violation of the False Claims Act.

Key Elements of the New Exclusion Guidance

The Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (“ACA”), and The Medicare Prescription Drug, Improvement, and Modernization Act (“MMS”) expanded and amended the authority of the Secretary or his designee (i.e., the OIG) to exclude or waive exclusion against certain individuals and entities from participation in Federal health care programs under Section 1128 of the Social Security Act (the “Act”).  The OIG made changes to the Act reflecting its expanded authority, which changes become effective February 13, 2017.  The most important changes and clarifications to the OIG’s exclusion authority under the Act are summarized below.

  • 10-Year Statute of Limitations For Exclusion

Consistent with the False Claims Act (FCA), the OIG determined that 10-years was sufficient time for it to determine if exclusion against a provider or entity would be necessary.  The limitation is not tolled if there is a pending matter relating to the same behavior under the FCA and the time limit for exclusion would not be subject to any tolling agreement signed with the Department of Justice.

  • Capturing Indirect Claims, Payments, and Providers

Recognizing that the continuing shift from fee-for-service claims to less direct reimbursement models (e.g. performance-based, shared savings payments, etc.), the OIG changed the language in the definitions from “submit claims” to “request or receive payment from” to ensure that providers or entities that receive funds “directly or indirectly” regardless of how or from whom the claim is submitted are subject to exclusion.  Moreover, providers or entities that make referrals or certify the need for services from the Federal program for which payment is made are also subject to exclusion if they refuse to provide information requested by contractors that support the referral or certification.

  • Increasing Exclusion Period For Certain Level of Financial Losses

The level of financial loss that is considered an aggravating factor in favor of a longer exclusion period was increased to $50,000.  For matters reflecting unnecessary or substandard care a financial impact of $15,000 or more is considered an aggravating factor.  Notably, the OIG rejected assessing the lack of alternative resources as a mitigating factor for decreasing the time for exclusion.  Rather, it stated that lack of alternative resources is a threshold consideration in determining whether to impose exclusion at all.

  • Obstruction of Audits Carries Same Weight As Obstruction of Investigation

Previously, the permissive exclusionary authority for the conviction of an offense of obstruction only applied to investigations; it now applies to all audits, ostensibly whether large or one-offs.  Although unwilling to define “audit” in the regulations, the OIG stated that an audit included any action in which government contractors were “verifying compliance with Government program standards.” 

  • Equal Exclusion Periods, Early Reinstatement and Presumption Against It

An individual with ownership or a control interest in an excluded entity will be excluded for the same period of time as the excluded entity, regardless of whether the individual divests his or her ownership or control.  Individuals who are excluded based on actions taken against their professional licenses relating to competence, performance, or financial integrity may rebut the presumption against early reinstatement if a new license is obtained in the same jurisdiction in which it was lost and the underlying issue is resolved.  If the license revocation period that served as the basis of exclusion is for longer than three years, the presumption against early reinstatement will be for the same period as the revocation set by the licensing board.  For individuals that choose not to seek a new license, early reinstatement may be considered, but there is a presumption against early reinstatement if the person has been excluded for less than three years. 

  • Exclusion Based On Misrepresentation or False Statement In Enrollment

    Exclusion may be based on a material misrepresentation or false statement in the federal health care program enrollment application.  This exclusion is not intended to apply to minor errors or omissions.  The false statement or misrepresentation need not have influenced the enrollment decision in order to result in exclusion.

  • Streamlined Notice and Opportunity For Oral Argument

    The OIG removed the two-part “Notice of Intent to Exclude” and “Notice of Exclusion” previously in place for exclusions under Section 1128(b)(7) of the Act in favor of a single “Notice of Proposal to Exclude.”  If not appealed, the “Notice of Proposal to Exclude” becomes effective within sixty (60) days of issuance.  The OIG asserts that a single notice clarifies when the exclusion takes place and the timing for appeal.  Individuals or entities threatened with exclusion for making a misrepresentation or false statement in an enrollment application may request oral argument before an OIG official prior to exclusion.

  • Default On Health Education Loans Or Scholarship Obligations

    According to the OIG, “[e]xclusion has been proven to be a successful remedy to incentivize individuals in loan default to repay the obligations owed to the Department.”  The exclusion will remain until the obligation is satisfied.

The expanded administrative exclusion authority provided to the OIG is intended to and closely resembles the authority of the Department of Justice under the FCA.  Providers should be aware of the expanded exclusion authority and increase their own compliance efforts in the face of increased enforcement actions.

Factors To Should Consider When Arguing Your Case Against Exclusion For Fraudulent Activity

In April 2016, the OIG reissued the non-binding criteria it used to determine whether to exclude a provider or entity under its permissive exclusion authority.  Understanding these criteria will help you design your compliance program, guide your actions when an investigation is initiated either by your organization or the Government, and provide you with areas of focus when you need to argue your case against exclusion.

Higher Risk

No Impact

Lower Risk

Conduct (click to show more)
  • Potential to cause adverse physical, mental, financial, or other impact
  • Lack of patient harm
  • Absence of criminal sanctions

Circumstances of Conduct (click to show more)
  • Occurs as part of a pattern
  • Over a substantial period of time
  • Continual or repeated
  • Conduct continued after the investigation initiated

Individuals Involved In Conduct (click to show more)
  • Individual with managerial or operational control led the activity

  • Low level employee
Conduct During Investigation (click to show more)
  • Any evidence of obstruction investigation or conceal conduct
  • Failure to timely comply with subpoena
  • Inability to engage in conduct because a contract or arrangement was canceled or a change in the Federal program rules
  • Prompt response to subpoena
  • Cooperation with the government
  • Cooperation leads to criminal, civil, or administrative action/resolution against others
Origin of Investigation (click to show more)

  • Person/entity initiated an internal investigation before becoming aware of investigation & shared work with the government
  • Self-disclosure of the activity occurred in good faith prior to becoming aware of investigation
Resolution (click to show more)
  • Adverse licensure action
  • Criminal resolution
  • Inability to pay

Conduct As A Result of Investigation (click to show more)

  • Disciplinary action against individuals responsible for the conduct
  • More resources devoted to compliance
  • Selling entity in arms-length transaction
  • Relevant additional training to improve practices
  • Accepting responsibility
Compliance History (click to show more)
  • History of prior CIA
  • Refusal to enter into CIA
  • Breached prior CIA
  • History of judgments, convictions, settlements under the Act.
  • Lack of compliance program that incorporates the 7 elements of an effective program
  • Compliance program that incorporates the 7 elements of an effective compliance program.
  • Significant Self-Disclosures prior to become aware of any investigation
Allyson Jones Labban
T (336) 378-5261
F (336) 378-5400
Lisa Kaminski Shortt
T (336) 378-5535
F (336) 378-5400
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