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Exclusions by the Department of Health and Human Services - Authorities and Procedures

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April 1, 2015

Billions of dollars every year are spent in the United States on "Federal health care programs,"1 including Medicare, Medicaid and Tricare, among others.2 For individuals and entities in the healthcare industry, reimbursement from these programs is a vital component of their business. However, many are unfamiliar with the authorities under which the Department of Health and Human Services ("HHS") excludes individuals and entities from participation in Federal health care programs, nor are they familiar with the nuances of the exclusion program. Understanding the types of violations that can trigger exclusion, as well as the process for responding to a proposed exclusion, is necessary for parties receiving reimbursement from Federal health care programs to ensure their compliance program is adequate and to understand the steps that must be taken to mitigate the impact of a proposed exclusion.

Introduction

Pursuant to sections §1128 and §1156 of the Social Security Act (the "Act"), HHS, specifically the Office of the Inspector General ("OIG"), has the authority to exclude individuals and entities from Federal health care programs. Exclusion means that items and services furnished, ordered or prescribed by the excluded individual or entity are not reimbursable under Medicare, Medicaid and all other Federal health care programs. While exclusion by HHS is similar in some respects to suspension and debarment, it does not bar excluded parties from being awarded federal contracts and grants. Once a party is excluded from participation they are added to the List of Excluded Individuals/Entities ("LEIE") maintained by HHS and the exclusion appears on the System for Award Management ("SAM"). Any healthcare entity participating in Federal health care programs that hires or contracts with an individual or entity on the LEIE may be subject to civil monetary penalties, so it is important that they establish processes and procedures to routinely (monthly is recommended) check the LEIE to ensure new hires, current employees, and potential contractors or subcontractors are not excluded.

Mandatory Exclusions

HHS is required by law to exclude individuals and entities from participation in Federal health care programs for certain violations, including convictions for program-related crimes such as Medicare or Medicaid fraud, as well as any other offenses related to the delivery of items or services under Medicare, Medicaid, State Children's Health Insurance Program ("SCHIP"), or other state healthcare programs. Furthermore, exclusion is required for patient abuse or neglect; felony convictions for other healthcare-related fraud, theft, or other financial misconduct; and felony convictions relating to unlawful manufacture, distribution, prescription, or dispensing of controlled substances. The minimum period of exclusion for these offenses is five years. Conviction of two mandatory exclusion offenses increases the period of exclusion to 10 years and conviction of three or more mandatory exclusion offenses results in permanent exclusion.

Permissive Exclusions

HHS also has discretion to exclude individuals and entities from participation in Federal health care programs for other offenses. These grounds include, among other things: (1) misdemeanor convictions related to healthcare fraud other than Medicare or a state health program or fraud in a program (other than a healthcare program) funded by any federal, state or local government agency; (2) misdemeanor convictions relating to the unlawful manufacture, distribution, prescription, or dispensing of controlled substances; (3) suspension, revocation, or surrender of a license to provide healthcare for reasons bearing on professional competence, professional performance, or financial integrity; (4) claims for unnecessary services or substandard services; (5) submission of false or fraudulent claims to a Federal health care program; (6) engaging in unlawful kickback arrangements; (7) defaulting on health education loans or scholarship obligations; and (8) controlling a sanctioned entity as an owner, officer, or managing employee.

OIG has published non-binding factors it will consider in deciding whether to impose permissive exclusion for various types of violations. For example, when an individual or entity participates in fraud, kickbacks or other prohibited activities under §1128(b)(7), OIG considers the following factors in determining whether to exclude:

  • Circumstances of the misconduct and seriousness of the offense;
  • Defendant's response to allegations/determination of unlawful conduct;
  • Likelihood that offense or some similar abuse will occur again; and
  • Financial responsibility.3
When deciding whether to impose permissive exclusion under §1128(b)(15), which authorizes OIG to exclude an officer or managing employee of an entity that has been excluded or convicted of certain offenses, OIG considers the following factors:
  • Circumstances of the misconduct and seriousness of the offense;
  • Individual's role in sanctioned entity;
  • Individual's action in response to the misconduct; and
  • Information about the sanctioned entity's (and related entities) history of civil or criminal convictions and administrative sanctions. The OIG also will consider the size of the entity, its corporate structure, and reporting relationships between subsidiaries, if any.4

Length of Exclusion

OIG may consider certain aggravating and mitigating factors under mandatory or permissive exclusions when setting the proposed length of exclusion. However, for all mandatory and some permissive exclusions, there are statutory minimums and, regardless of the mitigating factors, the length of exclusion will not fall below those required periods of exclusion. While the aggravating and mitigating factors vary based on the specific misconduct, below is a general list of the factors that may be considered:

  • Aggravating Factors for Lengthening Period of Exclusion:
    • Violations had a significant adverse physical, mental or financial impact on program beneficiaries or other individuals;
    • Sentence imposed by the court included incarceration;
    • Whether individual or entity has a documented history of criminal, civil or administrative wrongdoing; or
    • Whether the individual or entity was convicted of other offenses besides those which formed the basis for the exclusion or has been the subject of any other adverse action by any other federal, state or local government agency or board, if the adverse action is based on the same set of circumstances that serves as the basis for the imposition of the exclusion.
  • Mitigating Factors for Reducing Period of Exclusion:
    • The individual or entity's cooperation with federal or state officials resulted in:
      • The sanctioning of other individuals or entities, or
      • Additional cases being investigated or reports being issued by the appropriate law enforcement agency identifying program vulnerabilities or weaknesses; or
    • Alternative sources of the types of healthcare items or services furnished by the individual or entity are not available.

Procedure

For all proposed mandatory exclusions (§§1128(a)(1)-(4) of the Act) that are longer than the mandatory minimum five-year period, and most proposed permissive exclusions (§§1128(b)(1)-(b)(5), (b)(8)-(b)(11), and (b)(14)-(b)(15), and (b)(16) of the Act), the administrative process is the same. First, an individual or entity is sent a Notice of Intent to Exclude that includes the basis for the proposed exclusion and a statement about the potential effect of exclusion. The individual or entity is given 30 days to respond in writing with any information or evidence relevant to the whether exclusion is warranted and to raise any other related issues. If exclusion is based on excessive claims, furnishing of unnecessary or substandard items and services, or failure of health maintenance organizations ("HMOs") and competitive medical plans ("CMPs") to furnish medically necessary items and services, then a request to present oral argument to an OIG official may be made in conjunction with the submission of the written argument. Once OIG determines exclusion is warranted, a written notice of exclusion is sent to the affected individual or entity and exclusion is effective 20 days from the date of the notice. 

The appeals process differs for exclusion imposed under different provisions and thus it is important the individual or entity subject to these proceedings pay close attention to the provision under which they are being excluded. For example, while most exclusions are only effective after a party has had an opportunity to respond to a Notice of Intent to Exclude, exclusion can be effective immediately where HHS determines it is necessary to protect that health and safety of individuals receiving service. Social Security Act § 1128(c)(2)(B).

An individual or entity excluded may appeal by filing a request for a hearing before a HHS Administrative Law Judge ("ALJ"), but only on the issues of whether the basis for the imposition of the sanction exists and whether the length of the exclusion is unreasonable. The request for such a hearing must be filed within 60 days from the receipt of notice of exclusion. Any adverse decision from the ALJ may be appealed to the HHS Departmental Appeals Board ("DAB"). Judicial review in federal court is available after a final decision by the DAB.

Reinstatement

After the specified period of exclusion is over, individuals and entities are not automatically entitled to resume participation in the Federal health care programs. Those who wish to participate again must apply for reinstatement, and a written request may be sent to the OIG only after the date specified in the notice of exclusion. Premature requests will not be considered. The OIG will then provide Statement and Authorization forms to be completed, notarized and returned. Based on the information provided, OIG will authorize reinstatement if it determines the period of exclusion has expired, there are reasonable assurances that the types of actions that form the basis for the exclusion have not and will not recur, and there is no additional basis for continuation of exclusion. Once OIG approves a request for reinstatement, a written notice is sent to the excluded party. It is important to note that the process of reinstatement can take up to 120 days or longer.

If OIG denies the request for reinstatement, the excluded party is given a chance to submit a written argument against the continued exclusion. Excluded parties also can submit a written request to present written evidence and oral argument to an OIG official. The decision to deny reinstatement is not appealable or reviewable and the excluded party must wait a year to reapply.

Conclusion

Understanding the different bases for exclusions and the applicable processes is of particular importance for individuals and entities participating in Federal health care programs. While this client alert summarizes those authorities and procedures, please contact the authors if you have specific questions.


1 The term "Federal health care program" means: (1) any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, or in whole or in part, by the United States Government (other than the Federal Employees Health Benefits Program); or (2) any state healthcare program, as defined in section 1320a–7(h) of Title 42. 42 U.S.C. § 1320a-7b(f).
2 42 U.S.C. § 14402(d).
3 See 62 Fed. Reg. 67,392 (Dec. 24, 1997).
4 See http://oig.hhs.gov/fraud/exclusions/files/permissive_excl_under_1128b15_10192010.pdf.


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