Recently, the Office of Inspector General for the U.S. Department of Health and Human Services (OIG-HHS) announced proposed changes to its permissive exclusion1 and civil monetary penalty (CMP)2 authorities. OIG-HHS previously released a Special Advisory Bulletin in 2013 to complement these proposed changes, reemphasizing OIG-HHS’s prior views on exclusion and CMPs and underscoring the need for regulated entities to conduct diligence on potential business partners, and to screen for excluded individuals or entities.3 The proposed rules are primarily intended to implement key enforcement-related changes made to the Social Security Act (SSA) by the Affordable Care Act (ACA).4 Chief among OIG-HHS’s proposals are: (1) implementation of increased enforcement powers under ACA, including new exclusion and CMP authorities; (2) implementation of new subpoena authorities to investigate healthcare fraud violations; (3) revival of a 2002 proposal that affirmative exclusions under 1128(b)(7) are not subject to any statutes of limitation; (4) expansion and clarification of existing Emergency Medical Treatment & Labor Act (EMTALA)-related penalties; (5) clarification of aggravating and mitigating factors with regard to exclusion and CMPs; and (6) tying the length of exclusion periods of former owners/controllers to that of their excluded firms. Comments on the proposed Exclusion Rule are due by July 8, 2014, and comments on the proposed CMP Rule are due by July 11, 2014. The proposed changes are consistent with the increased degree of federal involvement in and oversight of the national healthcare delivery system enacted under ACA and are relevant, at some level, to every type of regulated entity or individual ranging from physicians to drug companies to insurance providers.5 OIG-HHS’s changes, if adopted, will create additional challenges for healthcare institutions, medical product suppliers, and other regulated entities that fail to maintain adequate compliance controls over activities such as patient intake and management practices, billing, coding, and price reporting procedures, overpayment monitoring, and third-party auditor interactions. Further, OIGHHS’s expansive interpretations of its exclusion authority – that 1128(b)(7) authority is not bound by any statute of limitation and that former owners should be excluded for the same length of time as their former employers/firms under 1128(b)(15) – may affect the defense strategy of regulated entities under investigation for potential healthcare fraud violations under the Anti-Kickback Statute, Stark laws, or False Claims Act. Finally, the expansion of previously limited testimonial subpoena authority could increase the number of independent healthcare fraud inquiries made by OIG-HHS with respect to regulated entities and individuals. Highlights from each of the two proposed rules follow. I. Background on Exclusion and CMP Remedies Available to OIG-HHS OIG-HHS has the authority under Section 1128 of the SSA to exclude individuals (such as physicians or executives at pharmaceutical manufacturers) and entities (such as institutional purchasers or suppliers) from participating in Medicare or Medicaid (Federal healthcare programs). There are two forms of exclusion: mandatory and permissive. Mandatory exclusions are imposed by statute and range from 5 years to permanent exclusion, and derive from a criminal conviction of certain healthcare laws. See SSA Sections 1128(a)(1)-(4); (c)(3). Permissive exclusions can be based on a broader range of conduct, including derivative civil violations (such as False Claims Act violations) and other crimes or professional licensing violations relating to fraud. See SSA Sections 1128(b)(1) - (b)(16); 1156. OIG-HHS has been under pressure from Congress to use its permissive exclusions more aggressively to hold individuals accountable for healthcare fraud-related violations.6 The SSA authorizes OIG-HHS to assess civil monetary penalties for Federal healthcare program-related violations ranging from kickback payments to misrepresenting the prices of goods or services. The amount of CMP assessments are based on statutory and regulatory limitations, as well as the discretion of OIG-HHS to consider aggravating or mitigating factors. OIG-HHS’s CMP authority is codified in various sections within the SSA, including the standalone Civil Monetary Penalty Law (CMPL), and as discussed herein, has been modified by ACA.7 II. Proposed Changes to Exclusion Authorities A. New Permissive Exclusion Authority Based on False Statements (Revised 42. C.F.R. § 1001.1751) ACA created a new authority for OIG-HHS to exclude any individual or entity that knowingly makes or causes to be made any false statement, omission, or misrepresentation of a material fact in any application, agreement, bid, or contract to participate or enroll as a provider of services or supplier under a Federal healthcare program. See SSA Section 1128(b)(16). Under the proposed regulation, OIG-HHS would determine whether to impose an exclusion under SSA Section 1128(b)(16) on the basis of information from various sources, including, but not limited to, the Centers for Medicare & Medicaid Services (CMS), Medicaid State agencies, fiscal agents or contractors, private insurance companies, State or local licensing or certification authorities, and law enforcement agencies. In determining the period of SSA Section 1128(b)(16) exclusion, OIG-HHS proposed to consider: —— The repercussions of the false statement; and —— Whether the individual or entity has a documented history of criminal, civil, or administrative wrongdoing. OIG-HHS proposes to allow individuals or entities whom it proposes to exclude under SSA Section 1128(b) (16) to present oral argument prior to imposition of the exclusion, similar to the process currently available under SSA Sections 1128(b)(6). B. New Exclusion Authority Based on Obstruction of an Audit (Revised 42 C.F.R. § 1001.301) OIG-HHS proposes implementing Section 6408(c) of ACA by expanding the application of SSA Section 1128(b)(2) permissive exclusion authority to include individuals convicted of an offense in connection with the obstruction of an audit that took place on or after January 1, 2010 related to: —— Any criminal offense under the mandatory provisions of the exclusion statute; —— Under the permissive provision related to healthcare fraud or fraud in a governmental program; or —— In cases when the investigation or audit related to the use of Federal healthcare program funds received, directly or indirectly. C. New Exclusion Authority Based on Failure to Supply Payment Information (Revised 42 C.F.R. § 1001.1201) OIG-HHS proposes implementing Section 6406(c) of ACA to broaden the scope of the permissive exclusion authority found in SSA Section 1128(b)(11) to apply to individuals who not only furnish but also “order, refer for furnishing, or certify the need for” items or services for which payment may be made under Medicare or any State healthcare program and fail to provide payment information.
D. Affirmative Exclusions Not Subject to Statutes of Limitation (Revised 42 C.F.R. § 1001.901) In 2002, OIG-HHS issued a proposed final rule stating that the Agency interpreted its exclusion authority as not being subject to statute of limitations; this proposal was met with resistance, and as a result, OIG-HHS never finalized the rule. See 67 Fed. Reg. 11928, 11929 (Mar. 18, 2002). The May 8, 2014 announcement appears to revive OIG-HHS’s prior policy position as to exclusions under SSA Section 1128(b)(7)8 in particular; this, despite the fact that SSA Section 1128(c) notes that the “Secretary may not initiate an action under this section more than 6 years after the underlying conduct” (internal quotations omitted). OIG-HHS justifies this interpretation on public policy grounds, noting, for example, that the basis for excludable conduct (such as facts raised in an underlying False Claims Act action) may not be readily ascertained within 6 years.9 E. Calculation of Owner/Controller Exclusion Length (Revised 42 C.F.R. § 1001.1051(c)(1)) OIG-HHS proposes amending § 1001.1051(c)(1) to state that the length of an individual’s exclusion under SSA Section 1128(b)(15) will be for the same period as that of the sanctioned entity with which the individual has or had the prohibited relationship, even if the individual terminates their relationship with the sanctioned entity after it has been excluded. F. New OIG-HHS Testimonial Subpoena Authority (Revised 42. C.F.R. § 1006.1) Prior to the enactment of ACA, OIG-HHS’s testimonial authority was limited to cases in which OIG-HHS was pursuing CMPs.
OIG-HHS proposes rules expanding its subpoena authority pursuant to section 6402(e) of ACA, which establishes a new authority to issue testimonial subpoenas for any potentially excludable offense under SSA Section 1128 (such as submission of false claims), not solely those potential offenses for which Congress authorized CMPs. G. Updates to Certain Aggravating Factors When making a mandatory or permissive exclusion determination, OIG-HHS may consider a number of factors outlined in applicable regulations to determine the length of an individual or entities exclusion.10 Overpayment: Aggravating Factor – (42 C.F.R. § 1001.102(b)(7))(mandatory exclusion) 1. OIG-HHS defined “overpayment” in its proposed CMP rule as “any funds that a person receives or retains under Title XVIII or XIX to which the person, after applicable reconciliation, is not entitled under such title.”11 2. The current regulations (42 C.F.R. § 1001.102(b)(7)) provide for an increase in the exclusion period for causing a financial loss to a Government program. 3. Because OIG-HHS considers “being overpaid by Federal health care programs for improper billings” to be “substantially the same as causing a loss to a Government program,” OIG-HHS proposed to remove this aggravating factor. Financial Loss: Aggravating Factors 1. OIG-HHS considers as an aggravating factor, whether the acts resulting in a conviction, or similar acts, caused or were intended to cause, a financial loss to a Government program of US$5,000 or more. See 42 C.F.R. §§ 1001.102(b)(1)(mandatory exclusion) and 1001.201(b)(2)(i) (permissive exclusion). See also 4 2 C .F.R. § 1001.701(d)(2) (iv) (permissive exclusion) setting the financial loss caused by the improper acts at US$1,500.
2. OIG-HHS proposed to update the regulations so that this aggravating factor is whether the acts resulting in conviction, or similar acts, caused or were intended to cause a financial loss to a Government program of US$15,000 or more. H. Procedural Changes to Notice Provisions (Revised 42 C.F.R. §§ 1001.2001, 2004, & 2006) OIG-HHS proposes modifying § 1001.2001 to eliminate the requirement that OIG-HHS send a written notice of intent to exclude prior to sending a notice of proposal to exclude. —— OIG-HHS believes it is sufficient to issue only a notice of proposed exclusion because the notice allows the individual or entity to request a hearing with an Administrative Law Judge (ALJ). I. Implementation of Mandatory Exclusion Waiver Provisions (Revised 42 C.F.R. § 1001.1801) OIG-HHS has proposed to update its regulations to better track the expanded mandatory exclusion waiver provisions necessary to implement legislative changes under the Medicare Modernization Act of 2003 (MMA), ACA, and other legislative developments. The MMA amended OIG-HHS’s authority to waive mandatory exclusions in several ways: —— First, section 949 of MMA amended SSA Section 1128(c)(3)(B) by expanding the waiver provision to allow waiver requests for individuals excluded under either of the two mandatory exclusion authorities that were added in HIPAA, SSA Sections 1128(a) (3) and (a)(4). —— Second, prior to MMA, a waiver request could be made only by the administrator of a State agency for a waiver of the State healthcare program. Section 949 of MMA expanded the mandatory exclusion waiver provision by permitting the administrator of any Federal healthcare program to request a waiver for the respective Federal healthcare program. —— Third, MMA added a provision requiring the requesting Federal healthcare program administrator to determine whether the exclusion would impose a hardship on Medicare beneficiaries, in addition to the existing requirement that the requesting administrator determine whether the individual or entity for whom the waiver was requested be the sole community physician or sole source of essential specialized services in a community. Additionally, in 2010, Section 6402(k) of ACA further amended the Act’s waiver provisions to permit the administrator of a Federal healthcare program to request a waiver if the administrator determines that exclusion would impose a hardship on any beneficiary or beneficiaries eligible to receive items or services under a Federal healthcare program, which broadened the waiver request beyond only Medicare beneficiaries as provided in MMA. J. New Early Reinstatement Process; Withdrawal of Certain Exclusions (42 C.F.R. §§ 1001.3001, 3002, & 3005) OIG-HHS proposes to institute a process for early reinstatement for individuals excluded under SSA Section 1128(b)(4) – individuals or entities excluded because of the loss of their healthcare licenses for reasons bearing on their professional competence, professional performance, or financial integrity. The exclusions are derivative of a licensing board action, and the exclusions are generally imposed for the same period as that of the licensing board or agency’s action. Thus, individuals or entities may be reinstated only when they regain their licenses. OIG-HHS proposes to amend the regulations to create a process for “early reinstatement.” The process would consist of two subparts: 1. The first subpart would allow an excluded individual to request early reinstatement if, after fully and accurately disclosing the circumstances surrounding the original license action that formed the basis for the exclusion, the individual (i) obtained a healthcare license, (ii) was allowed to retain a healthcare license in another State, or (iii) retained a different healthcare license in the same State. The OIG-HHS will consider a number of factors outlined in the proposed rule in determining whether to grant a request for early reinstatement.12 2. The second subpart would allow an excluded individual to request early reinstatement if he or she did not have a valid healthcare license of any kind, provided that the individual could demonstrate that he or she would no longer pose a threat to Federal healthcare programs and their beneficiaries. i. OIG-HHS proposed to consider similar factors as those in the first subpart. ii. OIG-HHS is also considering whether to apply a 3-year benchmark exclusion, which applies to other permissive exclusions under SSA Section 1128(b)(1), (2) and (3) for exclusions under SSA Section 1128(b)(4). The excluded individual could then apply for reinstatement when the 3-year period ends or when the individual regains his or her healthcare license, whichever comes first. OIG-HHS solicited comments on this alternative. Finally, OIG-HHS proposes to clarify that it will withdraw exclusions that are derivative of convictions that are reversed on appeal. While the withdrawal process was previously described at the reinstatement provisions of 42 C.F.R. § 1001.3005(a), OIG-HHS believes this further clarification was needed. III. Proposed Changes to Civil Monetary Penalty Authority Regulations OIG-HHS proposes to employ several changes to its regulations to implement sections of ACA which expand or modify CMP authorities for the following categories of violations:
A. Failure to report and return an overpayment (42 C.F.R. § 1003.200(b)(8)) Under the amended SSA Section 1128J(d), overpayments must be reported and returned by the later of 60 days after the date the overpayment was identified or the date any corresponding cost report is due, if applicable. The new CMPL authority under SSA Section 1128A(a)(10) does not contain a specific penalty amount, but instead uses the default penalty amount in the CMPL, which is up to US$10,000 for each item or service. OIG-HHS proposed regulatory text interpreting the CMPL’s default penalty as up to US$10,000 for each day a person fails to report and return an overpayment by the deadline in SSA Section 1128J(d). OIG-HHS is soliciting comments on whether to interpret the default penalty of up to US$10,000 for each item or service as pertaining to each claim for which the provider or supplier identified an overpayment. B. Failure to grant OIG-HHS timely access to records, upon reasonable request (42 C.F.R. § 1003.200(b)(10)) Section 6408(a)(2) of ACA amends the CMPL by adding a violation for failure to grant timely access, upon reasonable request, to OIG-HHS for the purpose of audits, investigations, evaluations, or other statutory functions. The proposed OIG-HHS definitions of “failure to grant timely access” and “reasonable request” give OIG-HHS flexibility to determine the time period in which a person must respond to a specific request for access depending on the circumstances. OIG-HHS believes the best approach to defining these terms is to specify the date for production or access to the material in the OIG-HHS’s written request. In making this decision, OIG-HHS will consider the circumstances of the request, including the volume of material, size and capabilities of the party subject to the request, and OIG-HHS’s need for the material in a timely way to fulfill its responsibilities. yy The OIG-HHS proposed exception when it has reason to believe that the requested material is about to be altered or destroyed. Under those circumstances, timely access means access at the time the request is made. C. Making false statements, omissions, or misrepresentations in any application, bid, or contract to participate or enroll with a Federal healthcare program (42 C.F.R. § 1003.200(b)(7)) Section 6402(d)(2)(A) of ACA amends the CMPL by adding a violation for knowingly making or causing to be made “any false statement, or misrepresentation of a material fact in any application, bid, or contract to participate or enroll as a provider of services or a supplier under a Federal health care program.” The OIG-HHS proposed regulation would add a violation for knowingly making or causing to be made “any false statement, omission, or misrepresentation of a material fact in any application, bid, or contract to participate or enroll as a provider of services or a supplier under a Federal health care program.” D. Making or using a false record or statement that is material to a false or fraudulent claim (42 C.F.R. § 1003.200(b)(9)) Codifying SSA Section 1128A, OIG-HHS proposed 42 C.F.R. § 1003.200(b)(9), which provides that OIGHHS may impose a penalty; an exclusion; and, where authorized, an assessment against any person whom it determines “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim for payment for items and services furnished under a Federal health care program.” E. Ordering or prescribing while excluded (42 C.F.R. § 1003.200(b)(6)) Codifying SSA Section 1128A, OIG-HHS proposed 42 C.F.R. § 1003.200(b)(6), which provides that OIGHHS may impose a penalty; an exclusion; and, where authorized, an assessment against any person whom it determines “orders or prescribes a medical or other item or service during a period in which the person was excluded from a Federal health care program, in the case when the person knows, or should know, that a claim for such medical or other item or service will be made under such a program.” F. Medicare Advantage and Part D Section 6408(b)(2) of ACA amended SSA Section 1857(g)(1) to provide that penalties, and, where applicable, assessments, may be imposed against a Medicare Advantage or Part D contracting organization when its employees or agents, or any provider or supplier who contracts with it, engages in the conduct described in the CMP authorities in SSA Section 1857(g). —— OIG-HHS explained that this statutory change broadens the general liability of principals for the actions of their agents under OIG-HHS’s existing regulations at § 1003.102(d)(5) (proposed § 1003.120(c)) to include contracting providers and suppliers who may not qualify as agents of the contracting organization. Section 6408(b)(2) of ACA also provides for penalties and assessments against a Medicare Advantage or Part D contracting organization that: —— Enrolls an individual without his or her prior consent; —— Transfers an enrollee from one plan to another without his or her prior consent; —— Transfers an enrollee solely for the purpose of earning a commission; —— Fails to comply with marketing restrictions or applicable implementing regulations or guidance; or —— Employs or contracts with any person who engages in certain wrongful conduct. G. Modifications to Aggravating and Mitigating Factors In determining the amount of penalty or assessment for a violation of the CMPL, OIG-HHS considers a number of aggravating and mitigating factors currently listed in 42 C.F.R. § 1003.106.
In 42 C.F.R. § 1003.410, OIG-HHS proposed modifying the provisions relating to the factors considered in determining the amount of penalty or assessment or period of exclusion for violations. —— OIG-HHS created a single, primary list of factors: (1) The nature and circumstances of the violation, (2) the degree of culpability of the person, (3) the history of prior offenses, (4) other wrongful conduct, and (5) other matters as justice may require. —— OIG-HHS proposed to clarify that possessing a lower level intent to commit a violation is not a defense against exclusion or assessment of CMPs, a mitigating factor, or a justification for a less serious remedy.13 OIG-HHS proposed adding a mitigating circumstance to the degree-of-culpability factor for taking “appropriate and timely corrective action in response to the violation.” —— The proposed regulation requires that a person, to qualify as taking corrective action, disclose the violation to OIG-HHS through the Self-Disclosure Protocol (SDP) and fully cooperate with OIG-HHS’s review and resolution of the violation. —— OIG-HHS explained that the “appropriate action for potential violations of OIG-HHS’s CMP authorities must include self-disclosure and cooperation in the inquiry and resolution of the matter,” but noted that it does “not believe that without self-disclosure through the SDP, the person qualifies for mitigation of the potential monetary or exclusion remedies.” Currently, OIG-HHS considers as an aggravating factor whether the individual or entity had any prior offenses in connection with a program covered by the CMPL, “or any other public or private program of reimbursement for medical services.” OIG-HHS proposed to change this criterion to “in connection with the delivery of a health care item or service,” which OIG-HHS explained broadens the types of prior offenses or conduct the Agency may consider to include private insurance fraud in addition to other offenses that have a nexus to the delivery of healthcare items or services. H. Alternative Methodologies for CMP Calculation for Excluded Individuals (42 C.F.R. § 1003.210) OIG-HHS proposes to change its methodology for calculating CMPs against excluded individuals, recognizing historical difficulties in determining the appropriate penalty and assessment amount for claims that are not separately billable by an excluded person, and recognizing difficulties brought on by bundled payments and prospective payments. To achieve a distinction, OIG-HHS proposed to define two new terms: “separately billable item or service” and “non-separately-billable item or service.” —— A “separately billable item or service” is defined as “an item or service for which an identifiable payment may be made under a Federal health care program” (e.g., office visit). —— A “non-separately-billable item or service” is defined as “an item or service that is a component of, or otherwise contributes to the provision of, an item or service, but is not itself a separately billable item or service.” OIG-HHS explained that in instances when the item or service provided by the excluded person is separately billable, the employing or contracting person would continue to be subject to penalties and assessments based on the number and value of those separately billable items and services. When the item or service provided by the excluded person is non-separately-billable, OIG-HHS proposed that penalties would be based on the number of days the excluded person was employed, was under contract, or otherwise arranged to provide non-separately-billable items or services. Assessments would be based on the total costs to the employer or contractor of employing or contracting with the excluded person during the exclusion, including salary, benefits, and other money or items of value. —— OIG-HHS proposed that the number of penalties increase by the number of days the prohibited relationship with the excluded person existed. I. Changes to EMTALA-Related CMPs (Revised 42 C.F.R. § 1003.106) OIG-HHS proposed minor revisions to clarify that the CMP may be assessed for each violation of EMTALA and that all participating hospitals subject to EMTALA, including those with emergency departments and those with specialized capabilities or facilities, are subject to penalties. OIG-HHS proposed revising the “responsible physician” definition to clarify that on-call physicians at any participating hospital subject to EMTALA, including the hospital where the individual initially presented and the hospital with specialized capabilities or facilities received a request to accept an appropriate transfer, face potential CMP and exclusion liability under EMTALA. —— OIG-HHS proposed that an on-call physician who fails or refuses to appear within a reasonable time after such physician is requested to come to the hospital for examination, treatment, or transfer purposes is subject to EMTALA liability. —— OIG-HHS proposed including on-call physicians at the hospital where the individual presents initially and requests medical examination or treatment, as well as on-call physicians at a hospital with specialized capabilities or facilities where the individual may need to be transferred. In addition, an on-call physician at the hospital with specialized capabilities or facilities may have violated EMTALA by refusing to accept an appropriate transfer. OIG-HHS also proposed revising the factors to clarify that aggravating circumstances include: (1) a request for proof of insurance or payment prior to screening or treating; (2) patient harm, unnecessary risk of patient harm, premature discharge, or a need for additional services or subsequent hospital admission that resulted, or could have resulted, from the incident; and (3) whether the individual presented with a medical condition that was an emergency medical condition. J. Calculation of CMPs for Late or Incomplete Drug Price Reporting (Revised §§ 42 C.F.R. 1003.1200, 1210, & 1220) The proposed final rule on CMPs notes CMS’s policy position to refer drug manufacturers and other relevant entities to OIG-HHS for CMP consideration if such entities submit incomplete or untimely quarterly and monthly Average Manufacturer Price (AMP) or Average Sales Price (ASP) data, for CMP consideration. AMP calculations are submitted using a 9-digit National Drug Code (NDC) identifier, while ASP is submitted using an 11-digit NDC. Consistent with the amended language of the SSA, OIG-HHS proposes to abide by the statutory cap of US$100,000 for CMPs authorized against manufacturers, wholesalers, or direct sellers of covered outpatient drugs who either refuse to comply with, or knowingly submit false information in response to, CMS price verification surveys. The same cap would apply to submitting false information to CMS in connection with pricing information. Further, OIG-HHS notes its intent to assess the US$10,000 per drug, per day CMP against regulated entities that furnish incomplete or untimely pricing information under the SSA’s quarterly and annual reporting requirements as set forth in the SSA. OIG-HHS intends to calculate penalties for late or incomplete AMP and ASP submissions both at the 9-digit NDC code level.