Earlier this month, the Office of Inspector General (OIG) for the Department of Health and Human Services released a special advisory bulletin providing guidance regarding the scope and effect of a provider’s exclusion from federal health care programs. Historically, in 1977 Congress first mandated the exclusion of physicians and other providers from participation in the Medicare or Medicaid program in the event a provider committed a program-related crime. In 1981, Congress went a step further and provided OIG with the ability to impose civil monetary penalties (CMP) against an excluded person that furnished services during an exclusion period.

OIG’s ability to impose CMPs against heath care providers or entities that employ or contract with an excluded person in violation of the individual provider’s exclusion was first authorized in 1996. Those CMPs can be as much as $10,000 for each item or service furnished by the excluded person, as well as an assessment of up to three times the amount claimed, and even exclusion from federal health care programs for the employing/contracting provider. Obviously, these penalties are quite significant and ensuring compliance with exclusion guidelines is imperative.

In an effort to provide guidance to excluded persons and other providers as to the scope and effect of exclusions and those activities that might result in violation of an individual or entity’s exclusion, OIG published a special advisory bulletin in 1999. The 1999 bulletin has remained the primary source of published guidance from OIG in this area until recently. After receiving comments and questions for more than a decade related to the topic of exclusions, OIG has provided an updated advisory bulletin seeking to clarify a number of issues.

The Effect of Exclusion

When a provider is excluded from participation by OIG, no federal health care program payment may be made for any item or service furnished (1) by the excluded person, or (2) at the medical direction or on the prescription of the excluded person. It is important to remember the exclusion applies to all methods of payment from federal health care programs, including itemized claims, cost reports, fee schedules, capitated payments, a prospective payment system, or any other bundled payment system, all without taking into account to whom the payment is actually made.

Thus, a hospital would be prohibited from receiving payment for items or services furnished by an excluded nurse, despite the fact that the nurse’s services are not separately billed and the hospital would actually be receiving those payments. In addition, excluded individuals are also prohibited from providing administrative and management services. This includes serving in executive or leadership positions with a provider that furnishes items or services that are payable by a federal health care program.

While the foregoing effects of exclusion are not surprising, the effects of the prohibition against providing services at the medical direction or on the prescription of an excluded person are somewhat more problematic from a compliance standpoint. Providers such as laboratories, imaging centers, durable medical equipment suppliers, and pharmacies often furnish services at the direction of individuals with whom they have no contractual or employment relationship.

However, OIG’s most recent bulletin makes it clear that liability can still attach to those entities should they provide services at the direction of an excluded individual. In order to avoid liability, the bulletin states “providers should ensure, at the point of service, that the ordering or prescribing physician is not excluded.” Based on this statement, all such entities should evaluate their policy and practice of screening individuals that order or prescribe the services the entity provides.

Despite exclusion, it is still permissible to employ or contract with an excluded person under two, very limited circumstances. First, so long as none of the items or services being provided by the excluded individual is paid for, either directly or indirectly, by a federal health care program, it is possible to contract with or employ an excluded individual. Second, a provider is not liable for CMPs for employing or contracting with an excluded individual if all of the services or items provided by the excluded individual are provided solely to non-federal health care program beneficiaries. While it is important to note the existence of these two very narrow “exceptions” for contracting with or employing excluded individuals, it appears as though it would be extremely difficult to devise a position meeting either situation. As a result, use of these “exceptions” should not occur often and should only occur after significant scrutiny.

Determinations of Exclusion

Because the effects of exclusion are significant, the OIG bulletin reiterates the use of the “List of Excluded Individuals or Entities” (LEIE) on the OIG website at http://oig.hhs.gov/exclusions as the most useful tool for combating the possibility of CMPs as a result of contracting with or employing an excluded individual and makes clear in a discussion of the General Services Administration’s (GSA) debarment list, SAM, which includes OIG's exclusions as well as debarment actions taken by other Federal agencies, that “OIG has no authority to impose CMPs on the basis of employment of (or contracting with) a debarred person.” When using the LEIE to determine whether an individual is excluded, providers should maintain documentation of the initial name search performed and any additional searches conducted in order to verify the results of potential name matches.

In addition, the bulletin suggests that searching the LEIE prior to employment or initial contracting is advisable as are continued periodic searches. Although there is no statutory or regulatory obligation to search the LEIE, providers would be well advised to make use of this valuable resource. The LEIE is updated on a monthly basis, so conducting monthly screenings of employees and contractors best minimizes the potential for CMP liability. In the absence of periodic rescreening of employees and contractors, a provider may be subjected to additional penalties if the OIG determines that the provider should have known about the exclusion sooner if it had done those periodic screenings.

When determining which individuals the provider should screen, OIG recommends the provider review each job category or contractual relationship to determine whether an item or service is being provided that is directly or indirectly payable, in whole or in part, by a federal health care program. If the answer to the inquiry is “yes,” then a screening should occur. OIG also warns that a provider who relies on screenings conducted by a contractor or a third-party company could nonetheless be liable for CMPs if the appropriate screenings are not conducted or are incorrect. Based upon OIG’s guidance, it is clear that all providers should conduct regular and careful screenings of all individuals employed or contracted with when CMPs could occur if an exclusion is detected. While this form of prevention could be somewhat burdensome, avoiding potential CMPs would be well worth the added burden.

What Happens If? . . .

Sometimes, despite best efforts, providers could find themselves employing, contracting with, or arranging with an excluded individual. If such a situation is identified, OIG advises the provider to utilize the OIG’s Provider Self-Disclosure Protocol to disclose and resolve the potential CMP liability.

Compliance with OIG exclusions is vitally important as the penalties for non-compliance can be severe. Knowing the rules and carefully ensuring that no prohibited arrangements are entered into could save providers substantial sums of money. Instituting a screening program in an effort to identify excluded individuals prior to contracting or as quickly as possible after the exclusion occurs is not only advisable, but necessary.