Introduction
Scope and effect of OIG exclusion

Liability associated with employing or contracting with excluded persons
Best practices for screening employers and contractors


Introduction

On May 8 2013 the Department of Health and Human Services' Office of Inspector General (OIG) released the Updated Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programmes, which replaces and supersedes a 1999 bulletin on the same topic.(1) The bulletin describes the scope and effect of the legal prohibition on federal healthcare programme payment to excluded persons. Specifically, the bulletin offers guidance on:

  • the scope and effect of the OIG exclusion;
  • the liability associated with employing or contracting with excluded persons; and
  • best practices to screen employees and contractors for excluded status.

Companies should review their policies and procedures related to screening potential employees and contractors for compliance with this updated guidance.

Scope and effect of OIG exclusion

The effect of an OIG exclusion is "that no Federal health care program payment may be made 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". This payment prohibition applies to all methods of payment, including itemised claims, cost reports, fee schedules, capitated payments or payments derived through a prospective payment system. The prohibition on payment applies if an excluded person participates, in any way, in the furnishing of items or services payable by a federal healthcare programme. Thus, an excluded person may not perform care-related services even where such services are not separately billable (eg, preparation of surgical trays or reviewing treatment plans). The OIG clarifies that excluded persons also may not furnish administrative and management services – such as health IT services and support, strategic planning, billing and accounting, staff training and human resources – unless these are unrelated to federal healthcare programmes.

The bulletin clarifies that items and services furnished at the medical direction or on the prescription of an excluded person are not payable when the person furnishing the item "knows or should know" of the exclusion. As such, providers that furnish items on the basis of orders or prescriptions – such as laboratories, imaging centres, durable medical equipment suppliers and pharmacies – "should ensure, at the point of service, that the ordering or prescribing physician is not excluded". In this regard, the bulletin notes that laboratories and pharmacies may be "responsible for overpayments and CMPs relating to items or services that have been ordered or prescribed by excluded individuals", even where they rely on Medicare Part D plans or state agencies to ensure that prescribers are not excluded.

An excluded person that submits a claim, or causes a claim to be submitted, to a federal healthcare programme may be subject to severe penalties, including:

  • a civil money penalty of $10,000 for each claimed item or service;
  • an assessment of up to three times the amount claimed for each item or service;
  • potential criminal prosecution; and
  • potential civil liability under the federal False Claims Act.

Liability associated with employing or contracting with excluded persons

A provider may be subject to civil money penalty liability if it arranges or contracts (by employment or otherwise) with an excluded person to provide services payable, directly or indirectly, by a federal healthcare programme. Specifically, for each item or service for which federal programme payment is sought, the OIG may impose civil money penalties of up to $10,000 and an assessment of up to three times the claimed amount. In addition, the OIG has authority to exclude the provider solely for employing or contracting with an excluded person to provide services payable by a federal healthcare programme. The OIG clarifies that liability could result if the claim submitted includes items or services furnished by an excluded person, even if the excluded person does not receive payments from the provider (ie, a volunteer).

The bulletin offers guidance with regard to the circumstances under which a provider that receives payment from the federal healthcare programmes may appropriately employ or contract with an excluded individual. A provider may contract with an excluded person so long as "no claims are submitted to or payment is received from Federal health care programs for items or services that the excluded person provides and such items or services relate solely to non-Federal health care program patients". Thus, a provider may employ or contract with an excluded person where:

  • the federal healthcare programmes do not pay, directly or indirectly, for the items or services being provided; or
  • the excluded person furnishes items and services solely to non-federal healthcare programme beneficiaries.

As a practical matter, this is a narrow exception and employing or contracting with an excluded person carries substantial risks for any provider that receives payment from the federal healthcare programmes.

Best practices for screening employers and contractors

The bulletin encourages providers to utilise the OIG's List of Excluded Individuals and Entities, which may be accessed through the OIG's website, to screen individuals and entities for excluded status. More specifically, the OIG recommends screening all persons that perform under a job category or contract where the items or service being provided are paid for, directly or indirectly, by a federal healthcare programme. According to the OIG, providers should also screen "contractors, subcontracts, and the employees of contractors". Providers should check the list before employing or contracting with persons and re-screen employees and contractors on a monthly basis. These screenings should be documented. Should a provider identify an employee or contractor that is excluded from the federal healthcare programmes, the bulletin recommends that providers utilise the OIG's Self-Disclosure Protocol to disclose and resolve the issue. Notably, the OIG issued the updated Self-Disclosure Protocol on April 17 2013.

For further information on this topic please contact Paul E Kalb or James Stansel at Sidley Austin LLP's Washington DC office by telephone (+1 202 736 8600), fax (+1 202 736 8711) or email (pkalb@sidley.com or jstansel@sidley.com). Alternatively, contact Hae-Won Min Liao at Sidley Austin LLP's San Francisco office by telephone (+1 415 772 1200), fax (+1 415 772 7400) or email (hminliao@sidley.com).

Endnotes

(1) See http://oig.hhs.gov/exclusions/files/sab-05092013.pdf

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