Representatives Pete Stark and Wally Herger Reintroduce a House Bill that Would Bolster the OIG’s Authority to Exclude Individuals and Entities­

Representative Pete Stark (D-Calif.), author of what is colloquially referred to as the “Stark Law,” continues to focus on perceived fraud and abuse within the healthcare industry. On February 11, 2011, Rep. Stark along with Rep. Wally Herger (R-Calif.) reintroduced the bill titled Strengthening Medicare Anti-Fraud Measures Act of 2011 (the Bill) in the House of Representatives. The Bill would bolster the Department of Health and Human Services Office of Inspector General’s (OIG) permissive exclusion authority with respect to individuals and entities affiliated with sanctioned entities. Although it had been previously introduced in the 111th Congress and was passed in the House last year, the Bill had not yet been taken up by the Senate.

Currently 42 U.S.C. § 1320a-7(b)(15) grants the OIG permissive authority to exclude individuals controlling a sanctioned entity. A “sanctioned entity” refers to an entity that has been excluded from participation under Medicare or a State health care program or that has been convicted of any offense that constitutes grounds for a mandatory exclusion or certain permissive exclusions. Individuals with “control” are those individuals either with a direct or indirect ownership or control interest in a sanctioned entity who know or should know of the action constituting the basis for the conviction or exclusion or who are officers or managing employees of a sanctioned entity. The OIG issued guidance for the industry in October of 2010 explaining how the agency interprets this section of the Social Security Act. A copy of the Health Headlines article discussing and providing a link to the OIG guidance is available by clicking here.

The reintroduced Bill would amend this same provision, 42 U.S.C. § 1320a-7(b)(15), to allow exclusion of individuals and entities “affiliated” with a sanctioned entity. First, the proposed amendments in the Bill would permit the OIG to exclude any “affiliated entity” of a sanctioned entity. An “affiliated entity” is defined to mean an entity affiliated with a sanctioned entity as well as an entity that was affiliated with the sanctioned entity at the time of the conduct that formed the basis for the conviction or exclusion. As an example, the Bill would permit the OIG to exclude a parent company of a sham or shell entity that was convicted of Medicare fraud or excluded.

Second, the Bill would extend to exclusion of individuals having certain relationships with a sanctioned entity or an affiliated entity. The Bill would permit exclusion of individuals having an ownership or control interest in a sanctioned entity or affiliated entity and who knew (or should have known) of the problematic conduct, as well as individuals serving as officers or managing employees of a sanctioned entity or affiliated entity. Third, the Bill would also extend to permissive exclusion of individuals who formerly held such ownership or control interests, or officer or managing employee positions, with a sanctioned entity or affiliated entity at the time of the conduct that forms the basis for conviction or exclusion.

The Bill has been referred to the House Ways and Means Committee, Budget Committee and Energy and Commerce Committee. A copy of the Bill is available by clicking here.