On May 8, 2013, the Office of Inspector General of the Department of Health and Human Services issued a special advisory bulletin on the “Effect of Exclusion from Participation in Federal Health Care Programs.” This recent special advisory bulletin supersedes the special advisory bulletin that was issued by the Office of Inspector General in September 1999.

The updated bulletin reiterates that no payments may be made by any federal healthcare program for any items or services furnished (1) by an excluded person or (2) at the medical direction or on the prescription of an excluded person. While the exclusion provisions apply to both individuals and entities, the bulletin refers to individuals and entities collectively as “persons,” as does this legal update.

According to the updated bulletin, payments covered within this prohibition include all methods of federal healthcare program payments, including itemized claims, cost reports, fee schedules, prospective payment systems, bundled payments and any other type of payment. The updated bulletin provides examples of the prohibited payments. Hospitals may not bill for certain items or services furnished by a nurse who is excluded, even though the nurse’s services are not separately billed but are instead included in a Medicare diagnosis-related group payment. Also included in this prohibition are items or services that are not directly related to patient care, for example, the preparation and review of treatment plans. The prohibition also applies to administrative and management services that are not separately billable, such as services provided by individuals who may be in executive or leadership roles, and those who provide other types of administrative and management services, including information technology services, accounting, staff training and human resources.

Excluded persons that submit claims to a federal healthcare program are subject to civil monetary penalties of $10,000 for each item or service, and up to three times the amount claimed for each item or service. Excluded individuals who submit claims may also be subject to criminal prosecution or civil actions under the False Claims Act. In addition, a provider that is owned by an excluded individual with an ownership interest of 5 percent or more, may be subject to the discretionary exclusion provisions.

The updated bulletin provides particular guidance regarding potential civil monetary penalty liability for providers that employ or enter into contracts with excluded persons. Healthcare providers that arrange or contract with persons the provider knows or should know are excluded are subject to the same civil monetary penalties as the excluded individual. The provider would also be subject to program exclusion. Providers who discover that they may have civil monetary penalty liability because they have employed or contracted with an excluded person may self-disclose the matter under the OIG’s Provider Self-Disclosure Protocol. The OIG’s recently released updated Self-Disclosure Protocol is discussed in McGuireWoods legal update published May 30, 2013.

The updated bulletin also recommends best practices for identification of excluded individuals and entities. Among these recommendations is that providers consult the OIG’s List of Excluded Individuals and Entities (LEIE) rather than other databases, such as the SAM database, which is maintained by the General Services Administration. The LEIE is maintained by the OIG, is updated monthly and provides additional details about excluded persons such as the statutory bases for exclusion, occupations, dates of birth and addresses. Because the LEIE is maintained by OIG, staff will be more readily available to answer questions and provide additional information regarding excluded individuals. The updated bulletin also recommends that in addition to screening prospective employees or contractors before they are hired, providers conduct additional screening on a monthly basis.

Providers who submit claims for payment to federal healthcare programs must remain vigilant in their efforts to identify excluded individuals so as to avoid monetary and other penalties, including potential exclusion for themselves. When questions regarding the status of employees or contractors arise, or when a provider discovers that it has employed or contracted with an excluded person and submitted claims for related items or services, providers may consider seeking experienced counsel to help investigate and mitigate the effects of such actions.