More than two years after first proposing regulations, the Office of Inspector General of the U.S. Department of Health and Human Services issued two final rules updating its (1) civil monetary penalty (CMP) regulations, 81 Fed. Reg. 88,334 (Dec. 7, 2016), and (2) safe harbors under the anti-kickback statute (AKS) and beneficiary inducement prohibitions, 81 Fed. Reg. 88,368 (Dec. 7, 2016). While the latter rule has received more media attention, the CMP final rule includes important guidance on the OIG’s administrative enforcement authorities, including implementing new CMP authorities and clarifying the approach to aggravating and mitigating factors, and is the focus of this article.

For context, the OIG’s CMP regulations, found at 42 C.F.R. part 1003, codify and provide guidance for enforcement of the OIG’s authority under the CMP statute (CMPL), which contains multiple distinct authorities that the OIG uses against a wide range of program violations. The CMP authorities allow the OIG to punish violations that include false claims; contracting with an excluded individual; beneficiary inducements; AKS misconduct; “knowing” Stark Law violations; and violations of the Emergency Medical Treatment and Labor Act (EMTALA), to name just a few. CMPs are imposed as part of a settlement when a provider or supplier follows the OIG’s self-disclosure protocol. In some cases, CMPs are pursued affirmatively and initiated by the OIG, often by the OIG’s new (2015) administrative litigation team.

The CMP final rule updates these regulations with the OIG’s expanded authority under the Affordable Care Act, including a new CMP for violations of the 60-day overpayment refund rule, to impose CMPs and exclusions on providers and suppliers. The CMP final rule also reorganizes part 1003 by subject matter to improve clarity and to provide updated guidance on the aggravating and mitigating factors that the OIG considers when determining the amount of a CMP or whether to impose an exclusion. In the CMP final rule, the OIG adopted the majority of the provisions in its proposed rule, 79 Fed. Reg. 27,080 (May 12, 2014), but revised some of its proposals, generally in response to public comment.

The CMP final rule offers insight into how the OIG may use its newly codified CMP and exclusion authorities as key components of its administrative enforcement efforts.

Major Provisions in the CMP Final Rule

  • Provided regulations for five new CMP authorities, which the ACA added to the CMPL:
  1. Failing to grant the OIG timely access to records, upon reasonable request (up to $15,000 per day, or $16,312, after inflation adjustment);
  2. Ordering or prescribing while excluded from participation in federal health care programs (up to $10,000 per violation, or $10,874 after inflation adjustment);
  3. Making false statements, omissions or misrepresentations in an enrollment or similar application to participate in federal health care programs (up to $50,000 for each false statement, omission or misrepresentation, or $54,372 after inflation adjustment);
  4. Failing to report and return an identified overpayment in accordance with the 60-day refund rule established by the ACA (up to $10,000 for each item or service, or $10,874 after inflation adjustment). The OIG dropped its proposal to interpret the CMP for this authority as a per day penalty rather than the default penalty amount in the CMPL (up to $10,000 for each item or service, before inflation adjustment); and
  5. Making or using a false record or statement that is material to a false or fraudulent claim (up to $50,000 for each false record or statement, or $54,372 after inflation adjustment).
  • Included a cross-reference to penalty amount increases, which can be significant for some CMPs, because older penalties are calculated with a “catch up” adjustment. See Inflation Adjustments Final Rule, 81 Fed. Reg. 61538 (Sept. 6, 2016). Violations occurring on or before Nov. 2, 2015, continue to be subject to the CMP amounts in existing regulations (or statute if not in regulation).
  • Clarifies guidelines for enforcement under other OIG authorities related to managed care organizations, Medicare Advantage and Part D contracting organizations; sellers of Medicare supplemental policies; Section 1140 violations (conduct involving electronic mail, internet and telemarketing solicitations); drug manufacturers’ drug price reporting obligations; adverse action reporting and disclosure; select agent program violations; beneficiary inducements; and notifying a skilled nursing facility, nursing facility, home health agency or community care setting of an upcoming survey.

Changes from the Proposed Rule in the CMP Final Rule

The CMP regulations set forth base penalty amounts for the various authorities, but those amounts may be adjusted by aggravating factors. For example, the CMP final rule extends the OIG’s existing aggravating factor of actual knowledge to all cases in which the scienter standard to prove a violation is lower than actual knowledge. The OIG had proposed adding an aggravating factor based on a person’s level of intent, but commenters expressed concern that proving, and distinguishing between, different degrees of mental states would be subjective. Commenters were also concerned that physicians and other health care providers might not fully comprehend the changes proposed by the rule and might be disadvantaged when trying to respond. The adoption of the actual knowledge factor should eliminate these uncertainties.

The OIG eliminated its proposal to include a provision that the OIG should exclude an individual or entity from future participation in the federal health care programs where there are aggravating circumstances. Commenters felt the provision suggested that exclusion is mandated when an aggravating factor is present and was superfluous, given the OIG’s authority to exclude even in the absence of aggravating factors. Although the provision would have made it easier for the OIG to establish the bases for exclusions in appeals before administrative law judges, the OIG agreed that the provision was superfluous and reiterated its practice of evaluating conduct on a case-by-case basis.

The OIG had also proposed to limit the mitigating factor of “corrective action” to a self-report of the conduct by submission to the OIG’s self-disclosure protocol. Commenters urged a flexibility for tailored corrective action, but the OIG rejected a more general interpretation of corrective action. The OIG did include submission to the Centers for Medicare and Medicaid Services’ self-referral disclosure protocol as a corrective action in the final rule. It also made a corresponding change to the EMTALA subpart, adding a single mitigating factor of appropriate and timely corrective action, which must include disclosing the violation to CMS prior to CMS’ learning of the violation from a complaint or otherwise.

The OIG dropped its proposed alternate methodology for calculating CMPs and assessments for employing excluded individuals whose services are not directly billed.

Key Points for Future Enforcement Risks

In light of this long-awaited CMP final rule, the enforcement stakes are higher for those who may be facing CMPs.

  1. Among other things, the financial stakes associated with CMP violations are higher, thanks to catch-up procedures for CMPs that have not previously been adjusted for inflation. In addition to the new ACA authorities discussed above, for violations occurring after Nov. 2, 2015, the CMP amounts for some other common CMPs have been increased as follows:

    $15,000 Stark Law violation CMP is now $23,863. $100,000 Stark Law circumvention scheme CMP is now $159,089. $50,000 AKS CMP is now $73,588. $50,000 EMTALA CMP is now $103,139.

  2. In addition, the CMP final rule clarifies that Stark Law overpayments are treated differently from other types of overpayments. The CMP for knowing violations of the Stark Law does not follow the 60-day overpayment refund rule as implemented by CMS. Despite acknowledging CMS’ authority to define terms related to overpayments, the OIG declined to update its definition of “timely basis” as used in the CMP authority for failure to return on a timely basis amounts collected in violation of the Stark Law. “Timely basis” is defined as the 60-day period from the time the prohibited amounts are collected by the individual or the entity. The OIG believed that making a change to the definition would be beyond the scope of the rulemaking. It is unclear how the OIG would enforce this CMP given the fact that CMS’ final rule is referenced in the final CMP rule. 81 Fed. Reg. at 88,337.
  3. The OIG revised aggravating circumstances justifying an increase in the CMP related to patient harm. In the prior rule, the aggravating circumstance for patient harm applied to certain violations relating to false or misleading information when the violation resulted in “harm to the patient, a premature discharge or a need for additional services or subsequent hospital admission.” The aggravating circumstance now applies to more OIG authorities and includes situations where the conduct could have resulted in harm. The EMTALA aggravating circumstances were updated to include situations where patient harm, or risk of patient harm, resulted from the incident.
  4. The definition of “responsible physician” was updated to clarify that the term includes on-call physicians at any participating hospital subject to EMTALA (hospital where individual initially presented and the hospital with specialized capabilities/facilities that receives a request to accept an appropriate transfer). Responsible physicians face potential CMP and exclusion liability under EMTALA.

This article first appeared in Law360 on December 22, 2016.