On September 6, 2019, the Department of Health and Human Services (HHS) Office of the Inspector General (OIG) issued OIG Advisory Opinion No. 19-05 (Advisory Opinion) permitting a community health center (Requestor) to purchase real estate from a limited liability company (LLC) owned and managed by an individual excluded from participation in federal health care programs (Proposed Arrangement). The OIG indicated the Proposed Arrangement would not result in the imposition of sanctions under the civil monetary penalties law because no claims for reimbursement from federal programs would be sought by the Requestor, nor would they use federal grant funds to finance the purchase.

The Requestor is a community health center that owns and operates eight community health center sites. Each site is enrolled in Medicare as a Federally Qualified Health Center and the Requestor receives Federal grant funding from the Health Resources and Services Administration (HRSA). Under the Proposed Arrangement, Requestor would purchase a site which includes a medical clinic currently operated by the Requestor from a company owned and managed by a married couple, one of whom is an individual excluded from participation in all federal healthcare programs. The Requestor would receive an independent appraisal of the property and the purchase price would be the appraised value. The Requestor indicated the transaction would not involve making claims to federal healthcare programs, that it would not use HRSA funds for the purchase or use financing from the excluded individual to purchase the property. The Requestor also certified that it would not have an ongoing relationship with the excluded individual after completion of the purchase.

The Social Security Act allows for the imposition of civil monetary penalties and other penalties for contracting with individuals excluded from federal healthcare programs “for the provision of items or services for which payment may be made under such a program.” The OIG noted that “items and services” include, among other things, those that are listed on a claim for payment, included in any reimbursement method or are listed on a cost report or other document supporting a claim for payment.

In the Advisory Opinion, the OIG indicated that even though the site being purchased could be an “item” if the Requestor submitted federal healthcare program claims or sought payment therefrom for its purchase, the OIG would not impose sanctions because Requestor will not seek any reimbursement from a federal healthcare program for the purchase of the property. Moreover, the Requestor certified that no HRSA funds would be used in the purchase and that it would be the sole owner after purchase. OIG indicated this would prevent any federal healthcare program funds from going to the excluded individual in the purchase or ongoing operation of the site. Accordingly, OIG indicated that the transaction would not be subject to the imposition of civil monetary penalties for contracting with excluded individuals as it “would not involve the provision of items or services for which payment may be made under any Federal health care program.”

While the OIG generally has an expansive interpretation of the prohibition on conducting business with excluded individuals, this Advisory Opinion provides insight as to the limits of the OIG’s interpretation of the exclusion prohibition.