Introduction Ten-year statute of limitations Permissive exclusion for failure to provide payment information Permissive exclusion for obstruction of audits Permissive exclusion of individuals with ownership or control interest in excluded entities Permissive exclusion for false statements or misrepresentations of material facts

Introduction

The US Department of Health and Human Services (HHS) Office of Inspector General (OIG) has published a final rule that provides guidance on its new and expanded bases for permissive exclusion from federal healthcare programmes. The preamble to the final rule addressing the OIG's enlarged exclusion authority suggests that the agency views its enforcement oversight as mirroring the reach of the False Claims Act.

The following provisions of the final rule are most likely to affect life sciences companies and providers.

Ten-year statute of limitations

The OIG had proposed to clarify that there is no time limitation on it seeking to exclude a provider. However, the final rule codified a 10-year limitations period from the time the conduct occurred. Responding to complaints about the practical difficulties that such a long limitations period raises, the OIG defended the 10-year provision by noting that it parallels the False Claims Act statute of limitations for claims brought by the Department of Justice.

Permissive exclusion for failure to provide payment information

The final rule builds on changes implemented by the Affordable Care Act to expand the OIG's authority to exclude persons for failure to provide payment information. Before the act, the OIG had the authority to exclude individuals furnishing or ordering covered items and services if they failed to provide certain payment information to the HHS. The OIG can now also exclude entities "referring for furnishing" or "certifying the need for" covered items and services.

The final rule amplifies the broad sweep of this provision by specifically targeting entities that furnish items or services to providers that do not submit claims specifically for those items and services, but instead "request or receive payment" relating to those items or services. The OIG described how this alteration is needed to keep pace with evolving payment methodologies that are increasingly shifting away from fee-for-service and towards bundled and performance-based payments.

Permissive exclusion for obstruction of audits

The final rule implements the Affordable Care Act's statutory expansion of exclusion authority to include obstruction of audits. Specifically, the OIG may exclude individuals or entities convicted for obstruction of audits related to specifically enumerated offences or, more broadly, related to "the use of funds received, directly or indirectly, from any Federal healthcare program". In response to a comment objecting to the rule and asking that the OIG not put obstruction of audits on par with obstruction of investigations, the OIG noted that not only was it required to expand the rule in this manner by statute, but also that this is warranted because "compliance with audit processes and requests is integral to fraud prevention and detection by payors and by law enforcement".

Permissive exclusion of individuals with ownership or control interest in excluded entities

An existing regulation allows the OIG permissively to exclude individuals with ownership or control interest in excluded entities under certain circumstances. The OIG clarified in the final rule that an individual with ownership or control interest in an entity that was excluded under Section 1128(b)(15) of the Social Security Act (applicable to individuals controlling a sanctioned entity) would be excluded for the same period as the entity on which his or her exclusion is based, regardless of whether the individual terminates his or her relationship with the entity after he or she has been excluded. The OIG rejected comments expressing concern about this clarification in cases where individuals may not have had the same level of knowledge warranting exclusion as did the entity as a whole, reasoning that this provision would "protect the programs and beneficiaries from individuals that OIG deems to be untrustworthy".

Permissive exclusion for false statements or misrepresentations of material facts

The final rule implements the Affordable Care Act's permissive exclusion authority for knowingly making or causing 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".

This includes setting forth sources that the OIG will consider to determine whether this provision applies. Like the recent OIG final rule regarding civil monetary penalties (42 CFR Section 1003.110), the OIG specifically rejected the proposition that in order to be material, false statements must in fact influence a government payment decision. This position puts the OIG in tension with the Supreme Court's decision last year in Escobar, which refused to define 'materiality' under the False Claims Act so as to reach circumstances merely where "the Government would be entitled to refuse payment were it aware of the violation".

For further information on this topic, please contact Scott D Stein or Meenakshi Datta at Sidley Austin LLP by telephone (+1 312 853 7000) or email (sstein@sidley.com or mdatta@sidley.com). The Sidley Austin website can be accessed at www.sidley.com.

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