The House recently passed a bill granting the OIG expanded authority to exclude from federal healthcare programs, executives and parent corporations affiliated with companies convicted of Medicare fraud. In a June hearing before the House Ways and Means Health Subcommittee, the Chief Counsel for the OIG testified:
Establishing accountability is challenging in part because corporations sometimes intentionally construct byzantine structures that obscure responsible parties from view. OIG has seen a variety of methods used to conceal true ownership, including establishing shell corporations, creating limited liability companies (LLC) to manage operations . . . creating LLCs for real estate holdings, and creating affiliated corporations to lease and sublease among the various inter-owned corporations.
Introduced by Rep. Pete Stark (D-Calif.) at the request of the OIG, the Strengthening Medicare Anti-Fraud Measures Act of 2010 (H.R. 6130) proposes to close two loopholes used to avoid exclusion: (1) the practice of propping up a shell company to insulate the parent company from liability, and (2) the ability of executives to leave companies accused of fraud prior to conviction and thereby escape exclusion from federal healthcare programs. To that end, the bill would expand the OIG's power to exclude any individual who was an officer, managing employee or owner of the company (or affiliated entity) at the time the fraud occurred.
The legislation authorizes the OIG to exclude "an entity affiliated with such sanctioned entity." For purposes of this bill, "affiliation" is a sweeping connector. For example, entities would be considered affiliated if one of the entities is a person with an ownership or control interest in the other entity or if there is a person who is an officer or managing employee of both entities.